Investors bet Trump climate withdrawal to boost US drilling

Today's inventory report from US Energy Information Administration (EIA) will be released at 15:00 GMT. It was the 20th straight weekly increase in the number of active USA oil rigs.

It's no wonder, then, that global oil prices have remained subdued and even announcements like the 6.4-million-barrel draw in U.S. oil inventories that the EIA announced yesterday have failed to have any impact.

The 1.3 million barrels a day reported by EIA for last week tops a record 1.2 million barrels per day exported in the week of February 17. Consensus analyst expectations called for a draw of 3.2 million barrels and 1 million barrels respectively in crude and gasoline stockpiles, according to S&P Global Platts. Analysts believed that stocks fell less - 2.517 million barrels, or 0.48 percent - to 513.783 million barrels. After languishing way below the corresponding 2016 levels since the start of 2017, USA gasoline demand jumped 252,000 b/d week-on-week to May 19, hitting 9.704 million b/d, the highest for that time of the year in five years.

Political issues ranging from a tightening race in the British general election to a pending decision from the USA president to pull out of the Paris climate deal added to the market jitters built up around swelling crude oil supplies from OPEC member Libya, which is exempt from a multilateral effort to balance the market with production declines, and helped weigh on crude oil prices in the Wednesday session.

US production increased, and the expectation is that ongoing activity in USA shale will continue to boost output, offsetting OPEC efforts. As always, traders want to know what the oil producers are going to do right now.

But the price fall appears to shows OPEC's control over the market has continued to wane.

Brent crude oil LCOc1 eased by 3 cents to $50.73 a barrel by 1327 GMT, while US light crude CLc1 gained 14 cents to $48.46. Within a few minutes, however, the price had jumped to $49.07, up about 1.4% for the day.

"From a technical standpoint, WTI Crude is under pressure and the breakdown below $48 should encourage a decline towards $46", opined Otunuga. "2018-19 futures need to be in the $45-$50 range", Goldman said, reports The Street.

Distillate inventories increased by 400,000 barrels last week and moved to near the upper limit of the average range for this time of year. But production is still half the 1.60 million bpd Libya pumped before the 2011 civil war.

Rystad Energy has predicted that United States oil production could hit an all-time high of 10 million barrels per day before the end of 2017.

API reported a draw of 8.6 million barrels of crude oil.

And if OPEC is incorrect and the global surplus persists, then deep-water will merely contribute to the glut - and presumably drag prices even further down than current levels.

Exxon Mobil Corp. (NYSE: XOM) traded up about 0.2%, at $80.68 in a 52-week range of $80.19 to $95.55, and the low was posted this morning. Warren Pies, energy strategist at research firm Ned Davis is bullish on crude oil prices.

  • Zachary Reyes