Recap: Tuesday’s trading session was choppy, as oil futures traded on both sides of unchanged, with July WTI initially recapturing the $50 level. Disappointment over OPEC’s decision not to raise the level of output cutbacks, in conjunction with the recovery of Libyan output, pushed oil prices lower. July Brent slipped to a low of $51.60 before severing losses, finishing the session at $51.84, down 45 cents, or 0.80%. WTI for July delivery bottomed at $49.03 prior to recapturing some of its losses, to settle at $49.66, down 14 cents, or 0.28%.
June RBOB fell less than half a cent, or 0.2%, to $1.639 a gallon, while June heating oil lost 1.4 cents, or 0.9%, to $1.549 a gallon.
Fundamental News: Russia’s President, Vladimir Putin, is scheduled to meet Saudi Arabia’s Deputy Crown Prince, Mohammed bin Salman, on Monday after the oil exporters reached a deal to extend cuts for another nine months.
The head of Russia’s Rosneft, Igor Sechin, and Saudi Arabia’s Energy Minister, Khalid al-Falih, discussed cooperation during their meeting on Tuesday. They also discussed possible ways of cooperation between Rosneft and Saudi Aramco in upstream, downstream as well as in liquefied natural gas projects and trading. They also praised the outcome of last week’s meeting between OPEC and non-OPEC producers.
Libya’s National Oil Corp said the country’s oil production was at 784,000 bpd due to a technical issue at the Sharara field, but was expected to start increasing to 800,000 bpd on Tuesday.
Alberta’s provincial government said it remained steadfastly committed to seeing the Trans Mountain crude pipeline through to completion.
Colonial Pipeline is allocating space for Cycle 32 shipments on Line 1, its main gasoline line from Houston, Texas to Greensboro, North Carolina.
Japan’s Ministry of Finance reported that the country’s crude imports from Iran in April increased to about 41,000 bpd from zero a year ago.
Goldman Sachs stated that 2018/19 oil futures need to remain at or below $50/barrel to discourage further shale production increases and encourage OPEC to maintain a range bound market. It said falling US production costs will keep supply rising for years to come. It also said that once OPEC’s production growth resumes after its self-imposed cuts, US and OPEC output is expected to increase by 1 million bpd to 1.3 million bpd between 2018 and 2020. It forecast 2017 and 2018 WTI crude prices at $52.92/barrel and $55/barrel, respectively. It also forecast 2017 and 2018 Brent crude prices at $55.39/barrel and $58/barrel, respectively.
JP Morgan cut its 2018 Brent oil forecast by $10/barrel to $45/barrel. It also cut its 2018 WTI forecast by $11/barrel to $42/barrel. It said the oil market will need to accommodate a substantial build in inventories next year which will weigh on prices.
According to Bloomberg, total US waterborne LPG exports from Houston, Port Arthur, Philadelphia and Seattle increased by 2.3% to 849,570 bpd in the week ending May 25th.
IIR reported US oil refiners are expected to shut in 341,000 bpd of capacity in the week ending June 2nd, increasing available refining capacity by 90,000 bpd from the previous week. It also expects offline capacity to fall to 252,000 bpd in the week ending June 9th.
Early Market Call - as of 11:55 AM EDT
WTI - July $48.35, down $1.31
RBOB - June $1.6027, down 3.74 cents
HO - June $1.5152, down 3.5 cents
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