API reports surplus while the market awaits EIA report

WTI continues to struggle trapped within the force of OPEC deal exerting positive impact and continued increase in the US oil production and in countries like Brazil and Canada. WTI is currently trading at $52.7 per barrel and Brent at $2.9 per barrel premium to WTI.

Key factors at play in crude oil market –

• Russian energy minister Alexander Novak and his Saudi counterpart Khalid al-Falih met to show support for the joint OPEC/N-OPEC deal.
• However, Mr. Falih indicated that Saudi Arabia doesn’t like to intervene in response to structural changes to the oil market.
• Saudi Arabia could be bypassing the OPEC deal by increasing exports of refined products.
• OPEC is in almost full compliance with the production cuts. As of now, the compliance is at 94 percent.
• US production rose from 8.428 million barrels in last July to 9.032 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.
• Some OPEC members are calling for no continuation of the deal when it expires in June.
• Backwardation is back in the oil market and it is currently at 38 cents.
• API reported a surplus of 11.6 million barrels of crude oil.

Today’s inventory report from US Energy Information Administration (EIA) will be released at 15:30 GMT. Trade idea –

• We expect the WTI to extend gains towards $59 per barrel, and then towards $67 per barrel. However, a decline towards $46 per barrel in the short term can’t be ruled out. We don’t suspect the oil price to break below $42 stop loss area for the long call.