Oil Stocks Collapsing Under the Crude Selloff

"Barring a spike in geopolitical tensions.oil prices will simply not be able to materially rally through resistance in the mid $50s (WTI) until the pace of of US production moderates", said Tyler Richey, co-editor of the Sevens Report. US crude inventories were at 532.3 million barrels, which is only 3 million less than the new March record.

A preliminary Reuters poll showed analysts expected US crude stocks to have fallen in the week to April 14, building on a surprise decline the previous week.

US shale production is ramping up aggressively.

The Organization of the Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the de-facto leader, together with other producers like Russian Federation have agreed to cut output by nearly 1.8 million barrels per day (bpd) during the first half of the year to rein in a global fuel supply overhang and prop up prices.

Oil slumped to a two-week low overnight, after U.S. data showed a smaller-than-expected drop in overall crude stocks and a surprising build in gasoline inventories, which raised worries about excessively high global supply.

Crude oil prices have moved in a narrow band between $50 per barrel and $55 per barrel for several sessions, masking some of the volatility from emerging geopolitical strains that followed a mid-April military strike on Syrian targets by the United States.

Crude traders and investors in Asia also had their first chance to assess a 13th consecutive increase in the rig count by drillers of USA shale oil.

U.S. West Texas Intermediate crude futures were also down 47 cents at $52.71 a barrel.

In parallel, imports declined by 68,000 barrels a day last week to 7.8m barrels, while domestic oil output rose slightly. WTI was trading 30 cents lower at $52.35 a barrel on the New York Mercantile Exchange at 10:34am London time on Tuesday.

Oil prices were little changed on Thursday in a seesaw trading session, as investors weighed rising US production against comments from leading Gulf oil producers that an extension to OPEC-led supply cuts was likely.

Reuters reported that shale output from the Permian play, the country's largest shale region, was expected to reach a record 2.36 million bpd.

Oil-producing nations are moving closer toward ending a global glut and re-balancing the crude market, and Opec will decide next month whether to extend its cuts in output beyond June, the group's Secretary-General Mohammad Barkindo said. Russian Federation and 10 other non-OPEC producers agreed to cut half as much.

  • Salvatore Jensen