Morning Market Overview
New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent futures were dancing on either side of unchanged after the West Texas Intermediate and Brent contracts traded at four-month highs and the RBOB contract a nearly five-month high overnight on supply drawdowns in the United States reported Wednesday by the Energy Information Administration.
An unexpected 3.9 million bbl drawdown from U.S. commercial crude inventory during the week-ended March 8 rallied oil futures Wednesday morning into early trading today, with the stock draw coming alongside a 100,000 bpd decline in U.S. crude production from a record high to 12.0 million bpd for the week profiled.
On Tuesday, EIA reduced its 2019 outlook for U.S. crude production by 130,000 bpd to 12.3 million bpd from its projection month prior. EIA also reported the fourth consecutive weekly drawdown in gasoline supply during the week-ended March 8, down 4.6 million bbl to a 10-week low at 246.1 million bbl last week. Oil futures and equities encountered some selling pressure in early trading following news reports that a U.S.-China trade agreement might be delayed until late April at the earliest.
Separately, overnight data shows industrial production in China expanded a less-than-expected 5.3% during the year ended for January and February, down 0.4% from December, with January and February combined because of the lunar new year holidays that skews the monthly rates. The decline was due to utilities and mining while manufacturing strengthened. This morning, the Organization of the Petroleum Exporting Countries released their Monthly Oil Market Report showing its crude production declined 221,000 bpd to a 30.549 million bpd four-year low in February.
Venezuela accounted for the majority of the decline, with secondary sources citing output down 142,000 bpd from January to 1.008 million bpd while 535,000 bpd lower than February 2018. Crude production by Saudi Arabia declined 86,000 bpd to a 10.087 million bpd 10-month low, and nearly 1.0 million bpd below its output rate in November when it reached an 11.016 million bpd record high. Saudi Arabia’s energy minister indicated crude production from the kingdom would average 9.8 million bpd in March and April.