API reports deficit while the market awaits EIA report

As the WTI recovers from the slump of $47 per barrel, it has found support in the recent rise in geopolitical tensions in the Middle East. Last Week, the US President Donald Trump launched missile strikes on Syria in response to the alleged use of chemical weapons by the Assad government. WTI is now slowly grinding higher, along with the Brent. WTI is currently trading at $53.6 per barrel and Brent at $2.9 per barrel premium.

Key factors at play in crude oil market –

• US-Russia tensions with regard to Syria have taken the center stage of focus with regard to oil price.
• Hard negotiations are already under way to decide whether the OPEC deal that expires in June should be extended or not when the members meet in Vienna on May 23rd.
• While Iran is still in compliance with the deal on the average monthly production basis, its production has gone up in February.
• February report shows that OPEC still remains in full compliance with the deal as a group but many members are yet to adhere to the agreed levels.
• US production rose from 8.428 million barrels in last July to 9.2 million barrels per day last week. This is the highest level of production since last year.  Payrolls are once again rising in the oil and gas sector according to ADP job numbers.
• The oil market is back in contango, currently at $0.25 per barrel.
• API reported a draw of 1.3 million barrels of crude oil.

Today’s inventory report from US Energy Information Administration (EIA) will be released at 14:30 GMT. Trade idea –

• We expect the WTI to extend gains towards $59 per barrel, and then towards $67 per barrel if the oil deals are extended.