WTI was down overnight 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 $52.8 per barrel and Brent at $2.9 per barrel premium.
Key factors at play in crude oil market –
- OPEC is in almost full compliance with the production cuts. In January, the compliance was at 92 percent.
- US production rose from 8.428 million barrels in last July to 8.978 million barrels per day last week. This is the highest level of production since last year. Payrolls are once again rising in the oil and gas sector.
- Some OPEC members are calling for no continuation of the deal when it expires in June.
- Contango in the oil market diminished and the market has moved to backwardation. The near month future is trading at 38 cents discount to cash in case of WTI and 34 cents in the case of Brent.
- API reported a surplus of 9.9 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.
