WTI crude oil prices jumped to the highest level of $49.23 per barrel since June 6, 2017.
This was after after EIA’s latest report showed another 7.21 million barrels decline in the US crude oil stockpiles, which has fallen more than 10 per cent or 50 million barrels since April this year, making current stock positions of 483 million barrels first time lower by 1.1 per cent from same period last year.
Saudi Arabia, a key Opec member has decided to cut crude oil exports to 6.6 million barrels in August, almost 1 million barrel per day lower than same period last year, to support the oil markets and meet higher domestic summer demand.
There is a strong demand, apart from falling inventories in the US and lower exports possibility from Saudi, which is also paving the way to higher price trajectory. US crude oil demand has averaged 18.22 million barrels per day so far in July, 1.35 million barrels a day higher than July 2016. Moreover, YTD demand has seen 17.28 mbpd in 2017, notching 0.7 mbpd higher than same period last year. China crude oil import remained robust in H1, 2017.Imports were 8.55 mbpd or 212 million tonnes of crude oil in H1 2017, up about 14 per cent YoY.
There is equal amount of bearish factors dominating that will certainly limit upside sooner or later. Opec production has gone up during May and June, despite 1.8 mbpd output cut accord lasting until Q1 2018, which is raising question about its compliance part. Opec output rose 393,000 bpd to 32.611 mbpd in June. Though big chunk of rise in production came from Nigeria and Libya, which were not part of the pact, but still latest compliance was about 78 per cent from initial month’s reading of above 90 per cent.
Moreover, Opec exported 25.92 million barrels per day (bpd) in June, up 450,000 bpd from May and 1.9 million bpd more than a year earlier.
Not only Nigerian and Libyan production is hindering the impact of Opec’s output cut deal but US Shale production has also heightened the pain of Sheikhs. In reality, letter had impacted catastrophically than former for longer period. Nigeria and Libya’s production have gone up by 0.7 to 0.8mbpd since Opec led pact was announced. US production has surged to a 2-Year high, above 9.40mbpd in July 2017, up 0.9mbpd than what it was in July last year.US rig counts stands at 764 units, the highest level since April 2015. As prices of crude oil have gone up recently it will poise risk of further opening of oilrigs that will, in turn, increase US production further in the weeks ahead.
o sum up, WTI crude oil prices are likely to hover inside in its ongoing consolidation band of $41.8 and $56 for some more time, bullish factors will take charge near lower band value while, bearish factors will play its role near upper band value.
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