API reports surplus while the market awaits EIA report

WTI came under renewed pressure after API reported large built up in inventories. The oil has already been suffering increased production in the United States, a higher level of inventories, and a stronger dollar. WTI is currently trading at $51.8 per barrel and Brent at $3.1 per barrel premium.

Key factors at play in crude oil market –

• OPEC is in almost full compliance with the production cuts.
• US production rose from 8.428 million barrels in last July to 8.915 million barrels per day last week. Payrolls are once again rising in the oil and gas sector.
• Saudi oil minister had said that the current deal need not be extended beyond June when it expires.
• Contango in the oil market diminished and the market has moved to backwardation. The near month future is trading at 33 cents discount to cash.
• API reported a surplus of 14.2 million barrels of crude oil.

Today’s inventory report from US Energy Information Administration (EIA) will be released at 15:30 GMT. Trade idea –

• We expect the WTI to extend gains towards $59 per barrel, and then towards $67 per barrel. However, a decline towards $46 per barrel in the short term can’t be ruled out. We don’t suspect the oil price to break below $42 stop loss area for the long call.