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API reports large build while market awaits EIA report

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. In April, the production was broadly unchanged at 30.03 million barrels per day.
     
  • 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. India is reportedly lobbying for the renewal of SREs.
     
  • The crisis continues in Venezuela as oil production dwindled to 0.72 million barrels in March. Last week, a coup was attempted by supporters of self-declared President Juan Guaido, who had the backing of the United States and other countries like France, Brazil, and Columbia. However, the coup attempt failed due to lack of support from Venezuelans, which significantly strengthened Maduro’s position who is lobbying with Russia, China to counter U.S. sanctions. Venezuela’s oil production in April was 0.78 million barrels per day.  
     
  • The recent uncertainties surrounding Sino-American trade negotiations, where President Trump announced that $200 billion worth of Chinese goods would see a tariff jump this Friday, from 10 percent to 25 percent, taking a toll on oil prices. China retaliated announcing tariffs on $60 billion worth of goods.
     
  • U.S.  Crude oil production has reached a new record high of 12.3 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 8.6 million barrels of crude oil. Gasoline saw a build of 0.57 million barrels.

 

Key global oil benchmarks:

  • WTI - $61.2/barrel
  • Brent - $70.9/barrel
  • OPEC basket - $70.7/barrel
  • Urals - $70.8/barrel
  • Oman - $69.6/barrel
  • Dubai - $69/barrel
  • Western Canada Select - $43.7/barrel

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

 

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