Market Report & Analysis for 6/22/2018 Morning Edition

Morning Market Overview

Wednesday showed mixed performance in the oil trading pits following a mixed weekly inventory snapshot released by the EIA. The inventory report showed a large draw in crude oil stocks with large builds in refined products as refinery utilization rates increased.

The report was bullish for crude oil and bearish for refined products with the overall view neutral to slightly bearish as total combined stocks of crude oil and refined products were slightly higher on the week for the fourth weekly increase out of the last five weeks. Aside from the fundamental snapshot the main story line remains the OPEC meeting on Friday followed by the OPEC/non-OPEC meet on Saturday.

The main question on all market participants minds is will production be increased and if so by how much? The main question on all market participants minds is will production be increased and if so by how much? Many private meetings have been occurring all week with Iran looking like the main outlier as of this morning (Iraq was initially negative toward an increase but seems to be coming around).

The Saudi Arabian led contingency which includes Kuwait and Russia (from outside OPEC) all are still pushing for a production increase. The magnitude of the increase seems to have narrowed in recent days to the 300 to 600,000 bpd level from earlier talks of a 1.5 million bpd boost. Be aware historically Saudi Arabia tends to achieve what it wants at the OPEC meetings as it is the largest producer and has demonstrated in the past that it will act unilaterally if need be.

Tribal fighting in Libya over the last week has resulted in storage tank fires at the load port and even one collapse causing exports from Libya to decline by almost 500,000 bpd as of today. This is providing some support to the Saudi led coalition.

In its most recent report last week the International Energy Agency (IEA) indicated that global demand is likely to remain strong at least through 2019 but could be impacted by an all-out trade war between China and the US. Overall the projected growth in demand is supportive for the Saudi led coalition aims to increase crude oil production.