Menu

Search

  |   Commentary

Menu

  |   Commentary

Search

API reports large draw while market awaits EIA report

Oil benchmarks are moving lower as Iran has agreed to enter into negotiations with the United States over Iran’s missile program and nuclear ambition.

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. In May, the production declined further 29.88 million barrels per day. Recently OPEC members and non-OPEC participants agreed to continue the production cuts for another 9 months. In June, OPEC production was 29.83 million barrels per day.
     
  • The tense situation between the U.S. and Iran reached a new boiling point as the U.S. and its allies blamed Iran for the recent attack on oil tankers near its maritime borders. The world is fearing a military intervention by the United States in the region, which has been increasing military presence in the region. However, President Trump has shown significant restraint after Iran downed one American spy drone by not choosing to attack, which might have killed 150 Iranians.  According to the latest, Iran announced that it is now officially in breach of the stockpile limit, prescribed in the agreement. It has warned of further breaches if other partners, especially the EU fails to protect Iran’s economic interests. However, Last night, during a cabinet meeting, U.S. Secretary of State Mike Pompeo said that Iran has agreed to engage in negotiations with the United States.
     
  • The crisis continues in Venezuela as oil production dwindled to 0.72 million barrels per day in June. However, Nicolas Maduro recently signaled that he is open to negotiations.
     
  • The recent uncertainties surrounding Sino-American trade negotiations, where the U.S. announced 25 percent tariff on $200 billion worth of Chinese goods. China retaliated announcing tariffs on $60 billion worth of goods. The tensions are on the rise as both sides prepare to hurt the other. The United States is planning to impose 25 percent tariffs on the next tranche of Chinese goods worth $300 billion, whereas China is threatening the United States with rare earth exports. China will also unveil a list of U.S. companies that might face greater scrutiny. However, the Sino-American trade negotiations have resumed after a successful meeting between President Trump and President Xi on the sidelines of the G20 meeting. But the actions taken since like arms selling to Taiwan puts the success of the meeting into question.
     
  • U.S.  Crude oil production has reached a new record high of 12.4 million barrels, well before EIA’s own projection.
     
  • CFTC report shows that fund managers and hedge funds are increasingly bullish on oil However, long positions have declined in recent weeks. Speculators are net-long 390K contracts, down 134,000 contracts since April. Last week, net long position declined by 2,000 contracts.
     
  • API reported a draw of 1.4 million barrels of crude oil. Gasoline saw a draw of 0.925 million barrels.

 

Key global oil benchmarks:

  • WTI - $58/barrel
  • Brent - $65/barrel
  • OPEC basket - $66.1/barrel
  • Urals - $64.9/barrel
  • Oman - $63.6/barrel
  • Dubai - $63.1/barrel
  • Western Canada Select - $40.5/barrel

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

 

  • Market Data
Close

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.