API reports draw while market awaits EIA report

Both Brent and WTI is heading higher over Middle East tensions and as oil market nears balance. WTI is currently trading at $71.8 per barrel and Brent at $7.2 per barrel premium to WTI.

Key factors at play in the crude oil market –

• President Maduro reelected as the president of Venezuela. This increases the risk of further sanctions on the country’s oil exports.
• President Trump moved the United States out of the Iran nuclear deal and promised to impose harshest of sanctions.
• U.S. State Secretary Mike Pompeo laid out conditions for a new agreement with Iran.
• Violence in Gaza could spread across the Middle East.
• Saudi oil minister said that the world has the capacity to absorb higher oil price. Saudi Arabia plans to target $100 per barrel oil.
• Russia increased production in March to 10.97 million barrels per day compared to 10.95 million barrels per day in February. OPEC and Russia to cooperate on oil production beyond 2018. OPEC is reportedly working on an agreement which would make Russia a permanent partner of OPEC in oil supply management with OPEC. This OPEC supergroup would also include other participating non-OPEC countries.
• Saudi Arabia’s suggested that Russia and Saudi Arabia is looking to form a supply cartel alliance that would last not for years but decades.
• Venezuela in crisis as oil production declined to 1.44 million barrels per day.
• EIA projects U.S. crude production to increase to 11. 4million barrels per day by end of 2019 and U.S. would become the single largest producer by next five years.
• Saudi corruption crackdown yielded $106 billion according to the country’s attorney general.
• OPEC production was 31.93 million barrels per day in April, up 12,000 barrels from March, according to OPEC’s monthly oil market report.
• Current U.S production at 10.7 million barrels per day.
• The oil market is in backwardation, both Brent and WTI.
• API reported a surprising draw of 1.3 million barrels of crude oil. Gasoline saw a build of 0.98 million barrels.

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

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