API reports draw while the market awaits EIA report

WTI continues to recover grounds as the effect of Hurricane Harvey fades. However, approaching Hurricane Irma is keeping a lid on price as it might reduce demand. WTI is currently trading at $48.9 per barrel and Brent at $5.4 per barrel premium.

Key factors at play in crude oil market –

• The oil market is still feeling the effects of Hurricane Harvey that battered the Gulf Coast leading to refinery shut down in the tune of 4.9 million barrels per day. Many refineries started but still not fully operational.
• Talks going on over the possible extension of the OPEC supply agreement.
• 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. Saudi Arabia has increased price of crude for Asian and American customers.
• Nigeria voluntarily agreed to a production cap of 1.8 million barrels per day.
• US sanctioned Venezuela and barred its access to U.S. dollar.
• 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 but declined over the past weeks by 35 percent over militant attacks. The production will resume this week.
• 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 5.78 million barrels of crude oil.

Today’s inventory report from US Energy Information Administration (EIA) will be released at 15:00 GMT.

Trade idea –

• Short term oil outlook changed. Buy WTI targeting $56 per barrel. Brent is likely to reach $59 per barrel. Stop loss at $42 per barrel.
• Thanks to Hurricane Harvey and Irma WTI might decline towards $44 area before moving higher.

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