API reports draw while the market awaits EIA report

WTI rose sharply yesterday after reports surfaced that despite large draw on inventories by refiners, Europe is running short on final fuel products. The North American benchmark WTI is currently trading at 445.7 per barrel and Brent at $2.4 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 the continued embargo on Qatar and indicated at future possible actions.
• During his visit, Secretary Rex Tillerson has signed a MoU with Qatar on terrorism financing.
• Iran is pushing for an increase in production to 4 million barrels per day by the end of the year.
• Libya will increase production to 1 million barrels per day by the end of July.
• 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 stands at 9.34 million barrels per day.
• The oil market is in backwardation increased since past two weeks, currently at $0.71 per barrel.
• API reported a draw of 8.13 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.

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest