Oil Prices Rise As EIA Confirms Strong Draw To Crude Inventories

The UAE, with lower compliance than other Gulf producers, has said suggestions that it is failing to comply fully can be explained by the gap between its own figures and those estimated by the secondary sources that OPEC uses to track compliance.

While OPEC and non-OPEC members are trying to draw down inventories, crude production has surged in the United States C-OUT-T-EIA, up 10 percent since mid-2016.

Anyway, the real impact of OPEC and non-OPEC cuts, totaling 1.8 million bpd, could be felt later in the year or even next year.

Refinery crude runs rose 229,000 barrels per day to 17.5 million bpd, surpassing its last peak at 17.3 million bpd in the week to April 21, and utilization rates increased 1.5 percentage points to 95 percent of nationwide capacity, data showed.

Another important factor is that USA shale companies have locked in higher oil prices when they occur by turning to hedging contracts. August Brent crude on ICE Futures Europe rose 49 cents, or 1%, to $51.25. It sent oil prices to 13-year lows, dealing a big blow to the shale revolution.

Investors pulled the classic "buy the rumor, sell the news" move following OPEC's decision to extend production cuts for nine months. The deal, supported by 600,000 bpd in cuts from non-members such as Russian Federation, is a global effort to reduce bloated stockpiles of crude oil and raise low prices.

Citigroup Inc. said in a report earlier this month that OPEC's warnings of an impending shortage are "overstated and misleading", while the growth of unconventional supplies like shale is "unstoppable" unless prices drop below $40 per barrel; the bank added that deep water production could grow by more than 1 million barrels per day (bpd) by 2022. Crude oil prices fell ~6% after OPEC's meeting.

Phillip Futures' investment analyst Jonathan Chanes said a US withdrawal would signal Trump's intention to further roll back emission regulations.

Cushing inventories recorded a draw of 0.75 million barrels which was very close to the API estimate. "I think that we will coordinate this date with all committee members", the minister said.

Ultimately, prices rather than planned cuts will rebalance the market, which will most likely require a period of flat or lower prices to curb shale growth and ensure USA output does not outstrip demand.

The EIA (U.S. Energy Information Administration) will release its weekly crude oil inventory report on June 1, 2017, at 11:00 AM EST.

In the light of the above discussion, we believe that despite contributing a large portion of the global oil supply, the OPEC has lost its power to dictate the direction of the oil prices.

Oil at $50-$55 a barrel is profitable for both the oil industry and the state budget, he said. WTI is now trading at $48.6 per barrel and Brent at $2.3 per barrel premium.

  • Zachary Reyes