Market Report & Analysis for 5/22/2018 Morning Edition
Morning Market Overview
Oil prices rose for the third week in a row as the geopolitical risk evolving in the Middle East and Venezuela remain elevated while the short-term fundamentals continue to provide positive support. Nothing new on the geopolitical front as a lot of comments regarding what might happen with Iranian exports continues to circulate around the media airwaves.
As we have been suggestions for the last several weeks we are not expecting any significant impact to Iranian crude oil exports over the next three to six months, However, if wrong we are convinced that select OPEC and non-OPEC countries that are participating in the production cutting accord will step up and increase production. Saudi Arabia already expresses concern about the price volatility just last week.
On the fundamental front, the weekly EIA inventory snapshot was slightly bullish on the week as total combined stocks of crude oil and refined products declined for the week ending May 11. Total US stocks are now around 174 million barrels below the high hit in 2015 and over 16 million barrels below the 5-year average. In addition, the IEA reported last week in their monthly oil market assessment that OECD inventories are now 9 million barrels below the 5-year average.
By the stated objective of the production cutting accord set by OPEC, the deal has cleared up the surplus as the original objective was to push inventories back to the five-year average. Inventories have now overshot the target and remain bullish. Friday afternoon in the latest Baker Hughes data hit the media airwaves reporting the number of rigs deployed to the US oil sector was unchanged on the week after increasing during the previous week.
The latest rig data still supports the overall uptrend in the US oil rig count remains. Total rigs deployed to the oil sector are higher by 124 or 17.2 percent year over year. As shown in the following chart oil rigs increased with US crude oil production increasing last week. US crude oil production continues in an uptrend setting new production records on a weekly basis. Total US crude oil production is about 16.2 percent above where it was for the same week a year ago. This week’s production came in at 10.703 million bpd.
