Oil price is struggling to gain grounds despite the OPEC and N-OPEC agreement on production deals. The oil price suffered famous ‘buy the rumor, sell the news’ trade on the agreement day and has been struggling since. WTI is currently trading at $48.6 per barrel and Brent at $2.3 per barrel premium.
Key factors at play in crude oil market –
- OPEC leaders and participating N-OPEC countries have agreed to an extension to the current supply cut deal for nine months until March 2018 that aims to reduce global oil supply by 1.76 million barrels per day.
- Saudi Arabia and Russia’s oil ministers have tried to support prices by suggesting that they are ready to do whatever it takes to rebalance the market. That effort failed to bear fruit.
- Saudi Arabia reducing prices for its Arab lights in Asia and in Europe.
- Saudi Arabia has lost market shares in Asia to Iran and Iraq thanks to the deal.
- April 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 9.32 million barrels per day last week. This is the highest level of production since 2015. Payrolls are once again rising in the oil and gas sector according to ADP job numbers.
- The oil market is back in backwardation but a small one, currently at $0.04 per barrel.
- API reported a draw of 8.6 million barrels of crude oil.
Today’s inventory report from US Energy Information Administration (EIA) will be released at 15:00 GMT.
Trade idea –
- We continue to maintain bearish outlook in oil with a short term target around $46 per barrel.
