Oil benchmarks are moving higher but in a struggling mode, despite the fact that supplies are declining relatively rapidly from OPEC since December last year, as economic growth concern in Europe and China are exerting downward pressure. WTI is currently trading at $60 per barrel and Brent at $8.2 per barrel premium to WTI.
Key factors at play in the crude oil market –
- OPEC and non-OPEC members decided to cut oil output by 1.2 million barrels per day, where OPEC would bear 0.8 million supply cut, and the rest would be borne by the Russia-led non-OPEC. According to OPEC’s monthly oil report, the supply dwindled by almost 0.8 million barrels in January, and OPEC as a whole is almost 80 percent compliance with the new agreement. In February the production has declined further by almost 220,000 barrels per day as OPEC reaches 93 percent compliance. OPEC is expected to reach full compliance by March.
- President Trump continues to attack higher oil price and OPEC’s production cuts, while the United States Congress is considering a bill to sue OPEC members responsible for market manipulation.
- Beginning November, the U.S. has re-imposed all the sanctions on Iran and has threatened to counter sanctions on any countries or bodies which violate the sanctions.
- The crisis continues in Venezuela as oil production declined to 1 million barrels per day in February.
- U.S. Crude oil production has reached 12.1 million barrels, well before EIA’s own projection.
- Oil future curves have now flipped further into backwardation. The closest month backwardation stands at $0.09 per barrel. (WTI)
- API reported a build of 1.93 million barrels of crude oil. Gasoline saw a draw of 2.9 million barrels.
Key global oil benchmarks:
- WTI - $59.9/barrel
- Brent - $68.2/barrel
- OPEC basket - $67 /barrel
- Urals - $68.1/barrel
- Oman - $66.8/barrel
- Dubai - $66.3/barrel
- Western Canada Select - $42.4/barrel
Today’s inventory report from the US Energy Information Administration (EIA) will be released at 14:30 GMT.
