Oil benchmarks are moving higher with pace as supply/demand fundamentals are catching up amid geopolitical uncertainties surrounding Venezuela, Libya, and Iran.
Key factors at play in the crude oil market –
- OPEC and non-OPEC members decided to cut oil output by 1.2 million barrels per day, where OPEC would bear 0.8 million supply cut, and the rest would be borne by the Russia-led non-OPEC. According to OPEC’s monthly oil report, the supply dwindled by almost 0.8 million barrels in January, and OPEC as a whole is almost 80 percent compliance with the new agreement. In February the production has declined further by almost 220,000 barrels per day as OPEC reaches 93 percent compliance. OPEC reached over-compliance in March as production dwindled by 0.534 million barrels per day.
- With oil price marching higher, President Trump might launch a twitter attack on higher price.
- The United States officially announced that it will not be renewing Significant Reduction Exceptions (SREs), better known as the sanctions waiver with regard to Iranian oil purchases, which were issued last November to several countries including India, and China (the two biggest importers of Iranian oil). The current SREs will expire in the first week of May.
- The crisis continues in Venezuela as oil production dwindled to 0.72 million barrels in March. Expect the United States to continue taking actions against Venezuela in order to topple the Maduro regime.
- In the coming years, oil production could rise fast in China as Shell ventures into China’s shale oil. China’s shale oil reserve, which is fairly large at 720 billion tons.
- U.S. Crude oil production has reached a new record high of 12.2 million barrels, well before EIA’s own projection.
- CFTC report shows that fund managers and hedge funds are increasingly bullish on oil as they continue to increase long positions and that quite rapidly.
- API reported a build of 6.86 million barrels of crude oil. Gasoline saw a large draw of 1.82 million barrels.
Key global oil benchmarks:
- WTI - $66.3/barrel
- Brent - $74.5/barrel
- OPEC basket - $73.4/barrel
- Urals - $74.4/barrel
- Oman - $73.2/barrel
- Dubai - $72.7/barrel
- Western Canada Select - $48.8/barrel
Today’s inventory report from US Energy Information Administration (EIA) will be released at 14:30 GMT.
