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API reports surprise draw while market awaits EIA report

Oil benchmarks are gradually moving higher as supplies are set to decline relatively rapid from OPEC beginning this year. However, growth concern in Europe and China are exerting downward pressure. WTI is currently trading at $51.7 per barrel and Brent at $8.6 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.  
  • According to Platts’ survey, the oil production from OPEC was down more than 0.6 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.
  • 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. According to Survey, it is set to decline further in December.
  • 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 11.7 million barrels per day.
  • Oil future curves have now flipped to backwardation.
  • API reported a draw of 0.65 million barrels of crude oil. Gasoline saw a large build of 6 million barrels.

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

 

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