Morning Market Overview

Oil prices were volatile last week ending Friday’s trading session with slight losses for the week on week comparison with a mixed performance for Friday’s trading session.

On Friday crude oil prices added value as concerns still exist as to the how long the Forties pipeline system will remain shut down and how it may impact the overall short-term supply & demand balances. One refinery in the UK already shut down due to lack of crude oil supply. There was a mixed picture regarding the normal oil price drivers.

With the OPEC accord extension now in the history books the market is primarily focused on the daily and monthly fundamental data snapshots along with day to day oil industry news hitting the media airwaves. Last week the EIA, IEA and OPEC all released their monthly oil forecasts. Overall, we would categorize the projections as neutral to bearish as they all basically suggested that global supply and demand will average out for 2018 or basically in balance. The first half of the year is expected to show a surplus (meaning global inventories will build) with the second half of the year projected to experience a deficit by about the same amount as the first half’s surplus.
The weekly inventory snapshot was mixed with crude oil stocks declining more than expected but offset by the larger than expect increase in gasoline inventories. That said total combined stocks of crude oil and refined products declined on the week and are now 112.8 million barrels below the peak hit in the middle of February. Total US inventories remain in a modest destocking pattern despite US crude oil production continuing to hit new record high levels. US crude oil production is now about 170,000 bpd above the high hit a few years ago when the oil pricing structure entered a strong price decline.

We expect oil trading to remain in a choppy trading pattern for the short term especially with the long holiday period just around the corner. By the second half of this week liquidity is likely to decrease strongly as many market participants head out for the long holiday season.