API reports draw while the market awaits EIA report

Oil price is riding higher on Saudi Arabia’s pledge to the review meeting in St. Petersburg Russia and as API have reported draw in inventories in the past few weeks. However, it has lost some momentum as reports suggest that despite Saudi pledge, production has moved higher in July within OPEC. WTI is currently trading at $47.8 per barrel; and Brent at $4.1 per barrel premium.

Key factors at play in crude oil market –

• Tensions in the Middle East continues with Qatar blockade.
• Saudi Arabia pledged to reduce exports by a million barrels per day. Supplies to Asia are set to decline by more than half a million barrels in September.
• Nigeria voluntarily agreed to a production cap of 1.8 million barrels per day.
• Venezuela is suffering a major political crisis, which could see a sharp drop in supplies from Venezuela that is close to 2 million barrels.
• The United States sanctioned Maduro of Venezuela and top officials but negative for oil and didn’t sanction the countries’ exports.
• Ecuador to become the first country to shy away from the OPEC agreement. Will increase production gradually.
• OPEC production increased by 173,000 barrels per day in July after rising by 393,000 barrels per day in June compared to the previous month. In May production increased by 366,000 barrels per day.
• Libyan production touched 1 million barrels per day in July.
• UAE looking to boost production capacity to 3.5 million barrels by the end of 2018.
• OPEC YTD compliance at 87 percent and non-OPEC compliance at 67 percent.
• The US production stands at 9.502 million barrels per day.
• The oil market is back in backwardation since last two weeks, currently at $0.10 per barrel.
• API reported a draw of 3.595 million barrels of crude oil.

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

• Short term oil outlook changed. Buy WTI targeting $56 per barrel. Brent is likely to reach $59 per barrel.

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