Market Report & Analysis for 3/28/2019 Morning Edition
Morning Market Overview
New York Mercantile Exchange nearest delivered oil futures were lower and the Intercontinental Exchange Brent futures contract flat in early trading Wednesday, with the U.S. contracts pressured following a build in commercial crude supply for last week reported by the American Petroleum Institute.
The increase in U.S. commercial crude stocks ran contrary to market expectations, and offset this week’s news that Venezuela suffered another major blackout that is again restricting already low exports from one of the founding members of the Organization of the Petroleum Exporting Countries. Late Tuesday afternoon, API said commercial crude inventory in the United States increased 1.93 million bbl during the week-ended March 22 that countered expectations for a 1.25 million bbl supply draw.
The market was mixed on their expectations, with crude supply typically building this time of year amid seasonal refinery maintenance programs. A high level of exports have worked to drawdown commercial stocks late in the first quarter, with the Energy Information Administration reporting inventory at a 439.5 million bbl nine-week low on March 16. A sharp drop in crude exports from Saudi Arabia and Venezuela have also tightened the global and U.S. supply-demand balance.
The API report was bullish for oil products, with gasoline stocks down 1 million bbl more than expected at 3.47 million bbl for the profiled week, and distillate stocks tumbled 4.28 million bbl that was well above an expected 1 million bbl draw. EIA will publish its weekly report at 10:30 AM ET. Lower oil products despite bullish statistics follows a rally by NYMEX April RBOB futures to a fresh better-than five-month high at $1.9807 gallon on Tuesday. The gasoline market is in a seasonal uptrend. NYMEX April RBOB, ULSD and the May Brent contract on ICE expire at Friday’s close, which also marks the end of the first quarter. The International Energy Agency earlier this month projected the global oil supply-demand disposition would slide into a 500,000 bpd deficit in the second quarter after holding a modest surplus in the first quarter amid OPEC+ production cuts.
Saudi Arabia is cutting their output deeper than their December pledge under the six-month agreement that runs through the end of June. The Saudis limited crude exports to 7 million bpd in March, and previously signaled they would cut their export rate to 6.5 million bpd in April, as the kingdom looks to boost the price of oil. U.S. sanctions on Iran and Venezuela have also tightened the global oil market, with both countries exempt from the OPEC+ agreement.
Years of mismanagement and rampant corruption have left the socialist state of Venezuela in disaster, with the South American country encountering its second major blackout on Monday. Reports indicate PDVSA, Venezuela’s state- owned oil company, has been unable to resume operations at the Jose port, the country’s main export port, and to restart upgraders essential in converting Venezuela’s heavy tarlike crude into a marketable product.
