Oil futures end higher after smaller-than-expected inventory rise
Feb 26 2017
S&P Global Platts reports that OPEC achieved 90% of their required cuts in January, while non-OPEC cuts are estimated to be about half that much so far. With WTI trading close to the sour benchmark Dubai, more USA crude is getting sucked into Asia. "The Far East will remain the main destination for USA crude exports in the short-term, assuming there are no big swings in price spreads".
Crude inventories rose 564,000 barrels in the week to February 17, its seventh straight week of increases, compared with analysts' expectations for an increase of 3.5 million barrels, the EIA said.
The oil for delivery in far-month April also fell Rs 62 or 1.68 per cent to Rs 3,635 per barrel in 3,026 lots.
Total world demand averaged 97.3 million barrels per day in the fourth quarter of 2016, while supply was running at 97.9 million bpd, according to the International Energy Agency (IEA). But they have been supported within a tight $4 to $5 range since November, when the Organization of the Petroleum Exporting Countries (OPEC) and other producers agreed to cut production.
"OPEC is determined to reduce its production to help manage the market", he said.
When the market is in contango and near-dated prices are below those for future delivery, it becomes profitable to store oil, rather than sell it on the spot market.
For nearly three years the world has been awash with billions of barrels of unwanted oil, after the explosion in USA shale production and OPEC's strategy of producing as much crude as possible to drive out less profitable rivals. For more on crude oil prices, read part one of this series. "With those two together, the U.S.is becoming an export juggernaut", said John Kilduff, partner at NY energy hedge fund Again Capital.Oil prices initially rose on the data that bullishly showed hefty product drawdowns and a sharp 1.5 million-barrel drop in crude stocks at the Cushing, Oklahoma, delivery hub for USA crude futures.
"The oil market remains focused on the global rebalancing act, with attention centered on OPEC compliance and USA production growth", said Michael Tran, director of energy strategy at RBC Capital Markets in NY.