Wednesday, 28 June, 2017

WTI futures sent reeling by smaller than expected decline in oil stocks

The IEA says the market is close to balance but global oil giants say no. The world is still oversupplied — and the surplus is big OPEC warns of a world that still has far too much oil
Nellie Chapman | 21 April, 2017, 19:46

OPEC members Saudi Arabia and Kuwait signaled that the Organization of the Petroleum Exporting Countries and other producers, including Russian Federation, would likely extend their oil output cut beyond June.

The report also stated that oil production in February increased to ten million bpd from 9.75 million bpd in January as more oil was processed by domestic refiners.

The US Energy Information Administration "estimates for a combined 124,000 barrels-per-day growth in US shale production over May have added another bearish element to the market", Reuters quoted analysts at JBC Energy, based in Vienna, as saying.

USA crude stocks fell last week as refineries hiked output, but gasoline supplies, which are already seasonally high, surprisingly increased, the Energy Information Administration said on Wednesday.

Although crude inventories fell by 840,000 barrels in the week to April 14 to 531.6 million barrels, still close to record highs, gasoline stocks rose by 1.4 million barrels as refinery crude oil runs increased by 334,000 bpd, the API said. Crude inventories fell 1.03 million bbl to 532.3 million last week, the agency reported Wednesday.

After strong gains overnight, the price for Brent crude oil, the global benchmark, was down 0.1 percent to $52.88 per barrel.

Traders said that the rising USA crude production posed a concern that the oil supply overhang would continue, while the jump in petrol stocks implied a stutter in demand. Opec exempted Nigeria and Libya previous year from cutting production, due to their internal conflicts, while it agreed to let Iran pump an additional 90,000 barrels a day to reach output of about 3.8 million. US WTI crude futures rose 1 cent to $52.66 a barrel.

Gasoline stocks posted a counter-seasonal build of 1.5 million barrels, despite heavier refining activity.

Chan said he expected Brent to test $54 and WTI $51.70.

USA crude futures settled down $US1.97 to $US50.44 a barrel, a 3.8 per cent drop, the worst-one day decline since March 8, as investors bailed out of long positions in response to the bearish inventory figures.

"Compliance among Opec member countries has been very high to cut output to rebalance oil markets in the first three months of the deal", said Mohammad Barkindo.

At a press conference in the United Arab Emirates, Saudi Energy Minister Khalid al-Falih said that "there is consensus building but it's not done yet".