API reports surplus while the market awaits EIA report

Oil price is grinding higher ahead of the OPEC meeting next week as Russia and Saudi Arabia privately agreed to the extension of the deal till March 2018. WTI is currently trading at $49 per barrel and Brent at $3.1 per barrel premium.

Key factors at play in crude oil market –

• OPEC remains in full compliance with the deal as a group though some members are yet to comply fully.
• Saudi Arabia’s oil minister Khalid al-Falih and the Russian oil minister Alexander Novak agreed to the extension of the deal till march 2018.
• The war of words between Saudi Arabia and Iran could weigh over the upcoming OPEC meeting.
• Iran’s oil ministry official announced that the country wants to expand production by 3 million barrels per day.
• OPEC leaders to meet in Vienna on 25th May to discuss the possible extension of the November deal.
•  Iraq plans to increase production to 5 million barrels per day in 2017. The country remains a hurdle to the extension of OPEC deal.
• IEA warns that new reserve addition has declined to a seven-decade low.
• Hedge funds are reportedly winding up the long positions.
• 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.
• Despite the strike in Syria, the US and Russia seems to be converging on the geopolitical front.
• March 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 9.314 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 according to ADP job numbers.
• The oil market is back in contango, currently at $0.21 per barrel.
• API reported a surplus of 0.88 million barrels of crude oil.

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

• Active call: We expect the WTI to decline towards $43 per barrel in the short term. The target is now extended to $38 per barrel. Despite the increased possibility of an OPEC deal, we remain committed to the above call, at least for now.