Analysis by Dr. Nancy Yamaguchi

 

Prices for crude, diesel and gasoline now have opened higher for five consecutive trading sessions. OPEC and key non-OPEC oil producers are meeting in Vienna today to make a long-awaited decision as to whether the January – June production cut agreement should be extended, and if so, for how long, and at what levels for the various participants. OPEC’s statements have been very positive, giving the market faith that the cuts will be extended. The consensus expectation is for a nine-month extension.

 

OPEC countries have achieved high levels of compliance with the production levels they originally targeted at the November 2016 meeting. Looking country-by-country, it is apparent that Saudi Arabia far and away shouldered the greatest burden in making deep production cuts. The Saudi cuts ensured high compliance rates for the group as a whole. Saudi Arabia’s cuts routinely went 500 – 600 thousand barrels per day (kbpd) below its pledged target.

 

Oil prices also are receiving support from the current set of data on inventories. The American Petroleum Institute (API) reportedly expects a drawdown in crude inventories of 1.5 million barrels (MMbbls), falling short of the Schneider Electric survey calling for a 2.7-MMbbl drop. The API data shows a gasoline drawdown of 3.15 MMbbls, well above the expected 0.8 MMbbls from the survey. API also reported a distillate drawdown of 1.85 MMbbls, while the survey expected a build of 0.3 MMbbls. The Energy Information Administration (EIA) will release official data later today.

 

West Texas Intermediate (WTI) crude prices have strengthened to approximately $51.50 per barrel (/b) this morning. WTI opened at $51.44/b today, an increase of 40 cents, or 0.78%, above yesterday’s opening price. Current prices are $51.52/b, 5 cents above yesterday’s closing price. Product prices opened higher during the current session and are trending up in early morning trading.

 

Diesel opened at $1.6101/gallon this morning. This was an increase of 0.97 cents (0.61%) above yesterday’s opening price. Current prices are $1.6125/gallon, an increase of 0.58 cents from yesterday’s closing price.

 

Gasoline opened at $1.6685/gallon today, up 0.56 cents, or 0.34%, from yesterday’s opening. Prices are $1.6688/gallon currently, up 0.74 cents above yesterday’s close.