API reports draw while the market awaits EIA report

WTI crude oil, suffered big selloff yesterday after rising steadily since 22nd June but that came after five weeks of consecutive decline. A weaker dollar is proving some support to the oil price. WTI is currently trading at $45.7 per barrel and Brent at $2.7 per barrel premium to WTI.

Key factors at play in crude oil market –

• Middle East brawl entered its second month as nine countries like Saudi Arabia, United Arab Emirates, Bahrain, Egypt, and Yemen has severed diplomatic ties with Qatar citing the latter’s support for extremist ideas and terrorist groups, and also of meddling in other countries’ affairs.
• Kuwait, which is mediating in the crisis, handed Qatar 13-point demands made by the opponent Gulf countries. Qatar has refused to give into the demands.
• After Qatar’s rejection, Saudi-led Gulf states announced a continued embargo on Qatar and indicated at future possible actions.
• Turkey has so far supported Qatar and called to end the blockade and finding a diplomatic solution. Turkey has sent food aid to Qatar and sent troops to its military base there.
• Libya will increase production to 1 million barrels per day by the end of next month.
• OPEC’s oil exports declined in June by 250,000 barrels per day.
• OPEC leaders and participating N-OPEC countries have agreed to an extension to the current supply cut deal for nine months until March 2018 that aims to reduce global oil supply by 1.76 million barrels per day.
• Saudi Arabia and Russia’s oil ministers have tried to support prices by suggesting that they are ready to do whatever it takes to rebalance the market. That effort failed to bear fruit.
• In May, OPEC production rose by 366,000 barrels per day, thanks to Libya and Nigeria.
• May report shows that OPEC still remains in full compliance with the deal as a group but many members are yet to adhere to the agreed levels.
• The US production has declined by 100,000 barrels per day since early June. Operating rigs declined last week for the first time in 24 weeks.  
• The oil market is in backwardation increased since last week, currently at $0.61 per barrel.
• API reported a draw of 5.764 million barrels of crude oil.

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

• We continue to maintain bearish outlook in oil and expect WTI to decline towards $40 per barrel. We recommended partial profit bookings as the price reached the first target around $42 per barrel. Recommend selling around $46 per barrel and at rallies.

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