Draw In Crude Inventories Lifts Oil Prices

HG Research Independent Research Consultant Hans Goetti discusses the price and production of oil

Oil prices slightly pared losses on Thursday after official government data showed USA crude stocks fell, contradicting an earlier industry report that weighed on prices. The lowering of 2017 growth expectations should have been price-supportive, especially for WTI, but with this year nearing an end, attention will shift more to the output expectations for 2018, which at this point are bearish.

Yesterday the EIA said it expects US crude oil production in 2018 to rise by more than previously expected.

WTI light sweet crude oil fell 70 cents, or 1.4%, to settle at $50.60/bbl. Distillate stocks fell by 1.5 million barrels, short of expectations for a drop of 2.2 million barrels.

US crude oil prices trim earlier losses after USA government data showed domestic crude stockpiles falling for the third week in a row; WTI now -0.9% at $50.84/bbl.

Though the 2017 figure was lower than the forecast in EIA's September report, the 2018 growth projection was revised upward to 9.922 million b/d, or a year-on-year jump of 680,000 b/d, versus the 9.84 million b/d forecast a month ago.

Gasoline inventories, one of the products that crude is refined into, rose by roughly 2.5m barrels, confounding expectations of a draw of 480,000 barrels while distillate stockpiles fell by about 1.5m barrels, missing expectations of a decline of 2.2m barrels.

This supports what I have been saying all along that prices are likely to remain rangebound until OPEC and other major producers vote to extend the production cuts beyond the May 2018 deadline and also decide to deepen those production cuts.

US exports fell in the most recent week to 1.27 million bpd, but USA exports have still exceeded 1 million barrels a day for three straight weeks, the first time this has happened.

Many analysts expect Brent to stay between $50 and $60 a barrel as long as global markets stay balanced.

The U.S. bank said oil supply and demand fundamentals meant it expected Brent to average $58 a barrel in 2018.

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