Oil Prices Rise on Falling Fuel Inventory

Oil prices climb on mixed US inventories data
OPEC sees oil supply surge from US countering its cuts
Author

16 March, 2018

The Monthly Oil Market Report for March also showed non-OPEC oil supply for 2018 is revised 280,000 bpd higher from the month's prior forecast, representing year-on-year growth of 1.66 million bpd to 59.53 million bpd total supply.

Earlier Wednesday, OPEC projected that USA and other non-OPEC supply growth will outpace global demand growth in 2018, raising the risk of imbalance in the oil markets and lower crude prices. It warned in early March that OPEC and Russian Federation need to rethink future output plans in light of the USA shale boom.

Light, sweet crude for April delivery rose 25 cents, or 0.41%, to $60.96 a barrel on the New York Mercantile Exchange. The WTI crude oil futures with delivery in April rose by 0.07 United States dollars, or 0.1%, to 61.03 USD per barrel.

Crude oil prices remain stable supported by the healthy market demand, despite a continuing increase in USA production and reserves.

The oil price has moved in sync with stocks uninterruptedly for the past 99 trading days, the longest such stretch in two years.

Opec and several other non-Opec producers led by Russian Federation began cutting supply in January, 2017 to erase a global glut of crude that had built up since 2014.

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In an unusual news release Wednesday, Saudi Arabia's national oil company said it would continue cutting crude oil production, signaling its commitment to a production cap agreement after Iran called for gradually lifting output curbs.

Venezuela lost another 60,000 barrels per day (bpd) in February, according to the Paris-based energy agency, and continues to present the largest supply risk to the global oil market. American gasoline inventories sank the most since September last week and product demand reached the highest since January, government data showed. That compared with analysts' expectations for an increase of 2 million barrels. The spread between the first two contracts settled at minus 4 cents, the first time it closed at a discount since January 22. If Trump walks away from the Iran nuclear deal on May 12 (the date of the next United States sanctions waiver), crude oil prices are likely to rise as global supply falls.

With OPEC's efforts already in place and the beginnings of a pullback in June expected by the market, attention has been focused on the current swing factor - American crude production. At the same time, crude oil throughput rose 7.3 percent to 93.4 million tonnes, implying a need for more imports.

Prices also received some support from Rex Tillerson's ouster as USA secretary of state.

Traders of crude oil cargoes face a dilemma. Without new sanctions, Monaldi expects Venezuelan production to drop by 300,000 to 350,000 b/d by the end of 2018, but if oil-sector sanctions are imposed, the decline could be as much as 400,000 b/d by the end of the year, he said.


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