Market Report & Analysis for 2/28/2019 Morning Edition

Morning Market Overview

NYMEX nearest delivered oil futures and ICE Brent futures advanced Tuesday afternoon, finding steady ground on global supply tightening following Monday’s technically driven selloff exacerbated by U.S. President Donald Trump’s call on Organization of the Petroleum Exporting Countries to ease its efforts in boosting the market. By Tuesday afternoon oil traders shifted their focus back from the Trump’s tweet urging OPEC to relax and go easy on price-boosting production cuts towards increasingly tightening market fundamentals.

In an interview with Bloomberg, Jeffrey Currie, head of commodities research at Goldman Sachs said that OPEC could rebalance the market by April through an applied strategy of “shock and awe”—sharp and deep cuts in the short–term to lift oil prices, while subsequently recapturing market share from competitors, namely surging shale production in the United States.

The Saudis and their Gulf allies are cutting deeper than what they agreed to in December, boosting the price by some 20% since OPEC+ agreement came into effect. The American Petroleum Institute reported a surprise draw in commercial crude supplies during the week-ended Feb. 22 while detailing a larger than expected gasoline supply draw and a surprise distillate stock build.

API reported crude supplies slid 4.2 million bbl during the week reviewed, missing calls for an expected 2.5 million bbl build. API data showed supply at the Cushing, Oklahoma hub increased 2.0 million bbl. Supply changes at the Cushing hub are closely watched since it serves as the delivery location for the New York Mercantile Exchange West Texas Intermediate futures contract. Trade sources said API data shows gasoline inventories slid 3.8 million bbl, more than three times estimates for a 1.0 million bbl draw while distillate supply added 400,000 bbl compared with calls for a 1.6 million bbl draw.