API reports deficit while the market awaits EIA report

The selling pressure on WTI eased somewhat after API reports a major draw on crude inventory. WTI is currently trading at $53.6 per barrel and Brent at $3.3 per barrel premium.

Key factors at play in crude oil market –

• OPEC members have agreed last November to cut down production by 1.2 million barrels per day. The deal would come into effect from January this year. Some of the members’ production like that in Qatar are already showing indications of cut downs.
• 10 Non-OPEC countries participated in a conference last Saturday in Vienna and concluded an oil deal, which would see their production being cut by 558,000 barrels per day.
• Russia will cut production by 300,000 barrels to 10.924 million barrels per day through the first half of this year, among which 200,000 barrels would be cut in the first quarter.
• Despite OPEC deal, EIA forecasts that oil price to remain around $50 per barrel next year as the supply from non-OPEC countries, not part of the deal likely to rise.
• The pipeline to largest oil field reactivated along with key oil exporting port, which would bring back supplies of 360,000 barrels of oil from Libya.
• Global oil inventory now stands at 3.1 billion barrels.
• US production has been rising after bottoming in August to 8.4 million barrels. The current US production stands at 8.8 million barrels per day.
• API inventory report showed that crude inventory last week declined by 7.4 million barrels.

Today’s inventory report from US Energy Information Administration (EIA) will be released at 16:00 GMT.

Trade idea –

• WTI reached $54 target per barrel and likely to extend the gains towards $59 per barrel. Continued hedging pressure is keeping a lid on oil.