Thursday, 30 March, 2017

Saudi Arabia confirms commitment to oil production cut

A price war is looming A price war is looming
Preston Stone | 18 March, 2017, 01:06

Brent crude was 9 cents lower at $51.72 a barrel by 12:51 p.m. EDT (1651 GMT), recovering from Tuesday's drop to $50.25, its lowest since November 30 when OPEC announced its supply accord.

However, stocks at the Cushing terminal in Oklahoma - the key delivery hub for US crude futures traded on the New York Mercantile Exchange - was up 2.13 million barrels from previous week's level to 66.53 million barrels.

The thinking was that a floor had been put under prices, at an unspoken level of $50 per barrel (/bbl), so producers were probably comforted by the fact that Brent crude oil barely moved much below or above $55/bbl until March 7.

Oil prices were on track to close the week higher, with WTI oil and Brent crude each up roughly 1% after dipping earlier in the week to lows last seen in November.

OPEC and some non-OPEC producers agreed to cut production from January 1 to reduce record stocks of global crude oil, but the deal has been dampened by data showing persistently rising US stockpiles. Its members need higher oil prices to balance government budgets, but cutting back production to prop up prices means losing market share as other suppliers step in to fill the gap.

William and Kate visit Paris
Middleton was joined by her husband Prince William who served as the Colonel of the Irish Guards after his appointment in 2011. Prince William has drawn a lot of flak for missing the Commonwealth Day service at Westminster Abbey for his trip to Verbier.

On the inventory side, USA oil stocks have increased for nine straight weeks, touching a record 528 million barrels, a record high. ICE gas oil changed hands at $458.25 a metric ton, up $3.25 from the previous settlement. Weekly data from the Energy Information Administration (EIA) indicate some potential weakness from gasoline, but we think this is more of a statistical anomaly and not from structural factors.

The index's energy sector climbed 2 per cent as oil prices pulled out of a dive, with the most influential gainers including Cenovus Energy Inc, which rose 3.4 per cent to $16.58, and Encana Corp, up 5.3 per cent to $14.63. Also, sharp crude oil price movements in a short period of time determine inventory gains and losses for these companies.

Some support came from the U.S.

"The uptick in arbitrage has not gone unnoticed by the large Middle Eastern (OPEC) producers", analysts from consultancy JBC Energy said in a note to clients this week. According to Sachdeva of Religare Securities, though sporadic pullback rallies are quite likely after the steep decline, broadly the outlook on crude oil prices is bearish what with the US Federal Reserve expected to hike interest rates and the expected strength in the dollar, which will be negative for oil prices. Combine this with any rumblings that OPEC may not extend cuts past May 25, and market sentiment remains extremely volatile despite a record number of long positions in the crude market.

The oil could take advantage on the weaker dollar and could increase, as you already know, a weaker dollar makes the oil much cheaper for the global customers from outside the United States.

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