WTI rises above $40 for first time in three months

U.S. benchmark West Texas Intermediate for delivery in April jumped $1.74 (4.5 percent) to $40.20 a barrel on the New York Mercantile Exchange.

Prices also surged Wednesday after the the Bloomberg Dollar Index, which tracks the currency against major peers, fell 1.1 per cent following a decision by the Federal Reserve to keep borrowing costs steady while scaling back forecasts of how high rates will go this year.

Exports rose to 1.55 million barrels a day in January, the highest since March 2014 and 9.2 percent higher than the month before, according to data Thursday from Riyadh-based Joint Organisations Data Initiative.

OPEC and non-OPEC producers will meet in Doha on April 17, Qatari Energy Minister Mohammed Bin Saleh Al Sada said, following a February agreement between Saudi Arabia, Qatar, Venezuela and non-OPEC Russia to stabilise output.

Declines in United States shale output are contributing more to the rise in oil prices than talks between major crude-exporting nations on a potential production freeze, International Energy Agency executive director Fatih Birol said Thursday. This came after analysts had been expecting U.S. Gasoline Inventories to decline -2.339M for the last quarter. “A smaller than expected gain in inventories in the USA also supported prices”, ANZ said. U.S. If the EIA’s estimates are correct, oil production in this category is due to be about 0.25 million barrels per day higher than previous estimates just a month earlier. A meeting would increase the likelihood of the first global supply deal in 15 years. As a result, as the short-covering rally reaches its limits, and the markets digest the fact that the world is still oversupplied with oil, prices could fall once again. So, on one hand, the oil production freeze project can bull the market and provide sustainable production, and on the other hand it gives a brilliant opportunity to the USA to recover the shale oil production after the oil price rise. Phillip Futures said it remains sceptical that anything more than a production freeze would be agreed. I do not know what the future holds from the demand side (it’s possible that downward revisions are warranted given what’s happening in developing countries) but the supply side expectations seem suspect to me without further data supporting the rising output at a time when production for many producers is unprofitable.

The increase reported by the Department of Energy’s statistical arm brings inventory levels in the country to another high in recorded history-as illustrated by the chart below. “There is going to be a period of consolidation and rebuilding now, and that could easily stretch out for more than a year yet”, he says.