API reports draw while the market awaits EIA report

WTI continues to decline as oil gets trapped in transit while Hurricane Harvey batters Texas coast shutting refining capacity of 2.3 million barrels per day. The spread between Brent-WTI has also been rising thanks to lower supplies from OPEC and the Hurricane. WTI is currently trading at $46 per barrel and Brent at $5.5 per barrel premium to WTI.

Key factors at play in crude oil market –

• Hurricane Harvey batters global oil market as refinery capacity falls in the United States leading to higher pressure in Asian Pacific and in Europe.
• Tensions in the Middle East continues with Qatar blockade.
• Saudi Arabia pledged to reduce exports by a million barrels per day. Supplies to Asia are set to decline by more than half a million barrels in September.
• Nigeria voluntarily agreed to a production cap of 1.8 million barrels per day.
• Venezuela is suffering a major political crisis, which could see a sharp drop in supplies from Venezuela that is close to 2 million barrels.
• The United States sanctioned Maduro of Venezuela and top officials but negative for oil and didn’t sanction the countries’ exports.
• Ecuador to become the first country to shy away from the OPEC agreement. Will increase production gradually.
• OPEC production increased by 173,000 barrels per day in July after rising by 393,000 barrels per day in June compared to the previous month. In May production increased by 366,000 barrels per day.
• Libyan production touched 1 million barrels per day in July.
• UAE looking to boost production capacity to 3.5 million barrels by the end of 2018.
• OPEC YTD compliance at 87 percent and non-OPEC compliance at 67 percent.
• The US production stands at 9.528 million barrels per day.
• The oil market is back in backwardation, currently at $0.42 per barrel.
• API reported a draw of 5.8 million barrels of crude oil.

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

Trade idea –

• Short term oil outlook changed. Buy WTI targeting $56 per barrel. Brent is likely to reach $59 per barrel.
• Thanks to Hurricane Harvey WTI might decline towards $44 area.

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