Oil benchmarks are moving higher with pace as supply/demand fundamentals are catching up amid geopolitical uncertainties surrounding Venezuela, and Iran. The recent recovery in Chinese and The United States’ economic numbers, namely the PMI report has energized the oil bulls.
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. According to Reuters’ survey, OPEC production is set to decline by another 0.28 million barrels in March, pushing compliance to 135 percent.
- With oil price marching higher, President Trump might launch a twitter attack on the higher price.
- Iran and the United States remain at loggerheads over the former’s nuclear ambition. Expect tensions to flare with 2-years remaining in Trump's 4-year term as he is set to emphasize on his strategy in the Middle East.
- The crisis continues in Venezuela as oil production set to decline below 1 million barrels in March. Expect the United States to continue taking actions against Venezuela in order to topple the Maduro regime.
- In the coming years, oil production could rise fast in China as Shell ventures into China’s shale oil. China’s shale oil reserve, which is fairly large at 720 billion tons.
- U.S. Crude oil production has reached a new record high of 12.2 million barrels, well before EIA’s own projection.
- CFTC report shows that fund managers and hedge funds are increasingly bullish on oil as they continue to increase long positions and that quite rapidly.
- Unrest flares in Libya as General Khalifa Haftar launched an attack on the Tripoli-based government backed by the UN. API reported a build of 4.1million barrels of crude oil. Gasoline saw a large draw of 7.1 million barrels.
Key global oil benchmarks:
- WTI - $64.4/barrel
- Brent - $70.9/barrel
- OPEC basket - $68.8 /barrel
- Urals - $70.8/barrel
- Oman - $69.5/barrel
- Dubai - $69/barrel
- Western Canada Select - $46.9/barrel
Today’s inventory report from US Energy Information Administration (EIA) will be released at 14:30 GMT.
