API reports deficit while the market awaits EIA report

WTI is faced with heavy selling pressure despite full compliance by OPEC members to the agreed deal, partly due to hedging and policy uncertainties in the US, under the new administration.

WTI is currently trading at $53.3 per barrel.

Key factors at play in crude oil market –

• OPEC is in almost full compliance with the production cuts.
• US production rose from 8.428 million barrels in last July to 8.96 million barrels per day last week. Payrolls are once again rising in the oil and gas sector.
• Saudi oil minister had said that the current deal need not be extended beyond June, when it expires.
• Contango in the oil market remains, indicating that the supply squeeze in the market is not large enough to cause backwardation. The near month future is trading at 41 cents premium to cash.
• API reported a draw of 2.927 million barrels of crude oil.

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

Trade idea –

• We expect the WTI to extend gains towards $59 per barrel, and then towards $67 per barrel. However, a decline towards $46 per barrel in the short term can’t be ruled out. We don’t suspect the oil price to break below $42 stop loss area for the long call.