Today, West Texas Intermediate (WTI) crude prices have been holding for the most part in a narrow range of $47.50 – $47.75 per barrel (/b). Last Friday brought a price rally, motivated largely by signs of flattening U.S. output, a major draw on inventories and more trouble in Libya. But the rally was short-lived, and some gains have been pared away with investors seeing little reason to bid prices back up.
Global oil supplies will remain abundant. A pipeline linking Libya’s Sharara oilfield with the Zawiya port was re-opened yesterday. Also, the U.S. Department of Energy (DOE) is accepting bids for the sale of 14 million barrels (MMbbl) of sour crude from the Strategic Petroleum Reserve (SPR).
The market will also be attentive to emerging discussions from OPEC. The fate of the production cut agreement will be a key item of discussion at the November general meeting. The group may decide to either “extend or terminate” the agreement.
Gaining consensus for the OPEC-non-OPEC agreement and its extension was a major feat for the disparate group of producers. The newly broached discussion point of “extend or terminate” could add considerable uncertainty to the market. The group has reported high rates of compliance with the pledged cuts (largely because of deep cuts by Saudi Arabia), and participants agreed to extend the agreement beyond the originally scheduled expiration in June 2017. But compliance fell from 98% in June to 94% in July. Can this suggest that some members viewed their commitment as complete in June, despite the extension? The OPEC compliance committee will meet again in September.
The American Petroleum Institute (API) reportedly expects a significant drawdown of 3.595 MMbbls from U.S. crude inventories this week. The crude drawdown was largely counteracted by the report of a 1.402-MMbbl addition to gasoline inventories plus a 2.048-MMbbl addition to diesel inventories. However, there may be vagaries in the data this week because of unusual circumstances including the solar eclipse on Monday and Tropical Storm Harvey, which is currently off the coast of Texas and could develop further by Thursday or Friday.
The market will look today for the release of official supply data from the Energy Information Administration (EIA). Last week, the EIA reported a major drawdown of 8.945 MMbbls from crude inventories, coming close to the API’s earlier prediction of a huge 9.2 MMbbls.
WTI crude opened at $47.64/b this session, an increase of 19 cents from yesterday’s opening. Currently this morning, WTI prices are $47.65/b, up by a penny since today’s opening. The daily price range has been narrow: $47.53/b – $47.78/b.
