Oil up on petrol draw, but market bloated

Oil prices are down as US inventories deliver
EIA raises Brent price forecast to $55 for 2017
Author

10 February, 2017

The US Energy Information Administration (EIA) reported that gasoline inventory fell by 869,000 barrels last week to settle at 256.2 million, against experts' prediction of a 1.1 million rise.

After surging more than 30% from mid-November to early January, the crude price has wavered in recently as traders weigh up issues ranging from production cuts from OPEC and non-OPEC nations announced in late November, to stronger global economic conditions against renewed U.S. dollar strength, a pickup in USA shale oil production and a strong lift in United States crude inventories.

He noted that, the resurgence of U.S shale production could undermine the efforts of Organisation of the Petroleum Exporting Countries, OPEC, and Non-OPEC members in mitigating the global oversupply consequently leaving oil prices vulnerable.

The most recent from OPEC, besides the remarks about a deadline extension for the cut, was the announcement that the specially set up committee that will monitor compliance, will release its first production calculations for January on February 17. The lowest price in the day was $51.22/Bbl.

"Admittedly, U.S. production has also rebounded faster than our rig modeling suggested", the analysts noted. "U.S. shale is coming back, and it's coming back strong".

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US commercial crude inventories soared by 13.8 million barrels to 508.6 million barrels, according to the EIA.

He said that while the USA petrol stock draw was interesting, it was insufficient to knock the market out of its range-bound trade, limited between production cuts from OPEC and brimming USA crude stockpiles. The tension between the two countries could further support oil prices increasing in the future. Should this be the case, February would see the highest US crude oil exports on record so far.

An EIA report upgrading the 2018 output forecast to 9.53m from 9.3m barrels per day projected in January probably didn't help matters either.

Iran recently reported that they have set guidance for their production of 4 million bpd by the end of March.

The recent Baker Hughes rig count shows that U.S. oil drillers increased by 17 to 583 last week, as higher oil prices attract shale explorers back to the market.


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