API reports surprise build while market awaits EIA report

Both Brent and WTI are struggling to gain grounds as price declined to a new post-agreement low. Higher supplies amid GDP growth concerns in Europe and China are pushing prices down. WTI is currently trading at $46.9 per barrel and Brent at $9.8 per barrel premium to WTI.

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.  
• Platts survey suggests that oil production rose marginally by 40,000 barrels per day in November. Reuters’ survey suggests that the production was down by 160,000 barrels per day in November. Both surveys suggest that Iran’s production has dropped below 3 million barrels per day in November.
• OPEC’s oil output in November declined by 11,000 barrels to 32.965 million barrels per day. This is the first decline in seven months. The report confirmed that Iran’s production indeed declined below 3 million barrels per day (2.954 million barrels per day).
• IEA reports that the oil supplies are increasing at rapid pace and production has now crossed well above 100 million barrels per day.
• Saudi Arabia has finally confirmed amid an International outcry that Washington Post reporter Jamal Khashoggi was killed inside Saudi consulate in Istanbul. Six people are likely to receive death sentences over the killing. In the Latest move, President Trump has announced that Washington stands with America’s long-term partner Saudi Arabia, despite the possibility that the crown prince might have been involved in the murder. But U.S. lawmakers passed a proposal that suggests that crown prince was involved in the assassination.
• Trump is pressing Saudi Arabia to increase oil production by almost 2 million barrels per day. Saudi Arabia is likely to comply once the supplies from Iran starts drying up due to sanctions by the U.S.
• Beginning November, the U.S. has re-imposed all the sanctions on Iran and has threatened to counter sanctions on any countries or bodies which violate the sanctions. However, the U.S. has granted a 180-day waiver of sanctions to several big Iranian crude oil importers like China, Korea, and India.
• EU, alongside Iran, Russia, and China have created a special purpose vehicle (SPV) to bypass the U.S. sanctions for companies operating in Iran.
• Venezuela in crisis as oil production declined to 1.137 million barrels per day in November.
• EIA projects U.S. crude production to increase to 12 million barrels per day by end of 2019 and U.S. would become the single largest producer by next five years.
• Current U.S production at 11.6 million barrels per day.
• Oil future curves have now flipped to backwardation.
• API reported a surprising draw of 3.45 million barrels of crude oil. Gasoline saw a build of 1.76 million barrels.

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

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