Inventory Glut Could Push Oil Down Further

They had their first increase in seven days on Wednesday, gaining 1.7 per cent.

Prices will return to the level of $55 per barrel “towards the end of Q2 2017, as USA crude inventories fall as refinery runs increase to satisfy U.S. consumer demand for refined products, notably gasoline”, Wood Mackenzie’s Alan Gelder believes. “There was none of that in the statement”, John Canally, investment strategist and economist at LPL Financial in Boston.

“At present, the oil market is trying to establish a direction and so is learning the new relationship between the oil price and USA tight oil supply growth”, Gelder concluded.

Shares of Dow Jones industrial component Exxon Mobil (XOM) were down 0.1% on the stock market today. This remains relevant not just for demand, but it also reflects potential downward pressure on the dollar if monetary policy shifts in Europe.

Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil – US Crude-bearish contrarian trading bias. Diamondback Energy (FANG) climbed 1.1%. “Bringing oil inventories down is a messy process, but the OPEC cuts are real, demand in Asia is decent and ultimately the market is tightening”.

May-loading for Qatar Marine crude sold at discounts to its official selling price for the first time in four months while spot premiums for Russian and Malaysia’s flagship Kimanis crude have also hit lows.

“Unless there is a global disruption where money needs to move to a safe haven, the interest rate movement isn’t going to have a long term material impact at this point in time”.

Nymex reformulated gasoline blendstock-the benchmark gasoline contract-rose 0.4% to $1.60 a gallon. The data is current through Tuesday, and captures the entirety of last week’s selloff.

Earlier, the pan-European STOXX 600 index gained 0.4 per cent, helped by energy and basic resource stocks.

Oil traded near $49 a barrel as Saudi Arabian Energy Minister Khalid Al-Falih expressed concern about high global inventories a day after the US reported its stockpiles declined for the first time this year.

Crude inventories fell by 237,000 barrels in the last week, compared with analysts’ expectations for an increase of 3.7 million barrels.

While the current interest rate increase has helped the crude oil markets, we believe that the impact of this rate hike could be short-lived, as there are other significant factors, such as the United States oil inventories, U.S. oil production, and the OPEC production, that play a far more crucial role in the estimation of oil prices.

“For those looking for a rebalancing of the oil market the message is that they should be patient, and hold their nerve”, the IEA said.

USA crude slid on Tuesday to its lowest since November. Crude oil output has reached 9.08 million barrels daily and is expected to continue to rise, with the April daily average estimated by the EIA to be 109,000 barrels higher than the March figure. Production by all Opec members, including cut-exempted Nigeria and Libya, fell to 32.14 million bpd. Brent spiked above $58 in early January. Although some have expressed concerns about rising USA shale production, the US obviously does not produce anywhere near a majority of the world’s oil. Oil prices rallied at once from about $45 a barrel for Brent crude to over $50, . While markets are still struggling to clear a surge in supply from OPEC at the end of 2016, compliance to the cuts remain above 90 percent, the International Energy Agency said.

USA gasoline and distillate inventories drew more than expected, the data also showed.