Oil Prices Little Changed Ahead of Inventory Projections
20 April, 2017, 07:28
OPEC's crude production fell last month while the Energy Department reported a surprise drop in USA stockpiles.
Later Tuesday, the American Petroleum Institute (API) will report estimates of inventories for crude and refined products at the end of last week, followed by official data from the U.S. Energy Information Administration (EIA) on Wednesday.
US oil stockpiles fell by 2.2 million barrels last week, according to the Energy Information Administration.
When producers from the Organization of the Petroleum Exporting Countries and non-OPEC countries like Russian Federation slashed their current and ongoing production agreement past year by a combined 1.8 million barrels per day, oil prices rallied by US$10 per barrel.
Traders said that the price rises were a result of reports that Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), had told other producers that it wanted to extend a coordinated production cut beyond the first half of the year.
Reuters reported that Brent crude futures climbed 20 cents to touch $56.43 per barrel, the highest since early March.
OPEC pledged to reduce output by 1.2 million barrels a day, with Saudi Arabia taking the bulk of the cuts - and so far reducing production deeper that it agreed.
"OPEC's compliance has been more than anticipated", an OPEC delegate said.
Signals of a tighter market in late March helped pull crude oil prices back above $50 per barrel.
OPEC cut oil output in March by more than pledged under a supply reduction deal and said oil inventories had fallen in February. Parties to the deal meet to consider the terms next month and it's widely expected the arrangement will be extended for another six months. Nevertheless, OPEC revised up its forecast for supplies from non-member countries in 2017.
Oil prices pared gains on Wednesday after the report was released to trade at around $56 a barrel LCOc1.
With demand expected to rise by 340,000 bpd in 2018, that would leave increasing amounts of USA oil for export or storage.
This is while the United States total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 488,000 barrels per day, according to the report.
Such a feat would mean domestic oil producers would have to put out an additional 1.2 million barrels a day over the next two years, up from the current 8.96 million barrels a day.