Recap: After obtaining its lowest settlement since March 28, WTI bounced back on Tuesday, stemming 6 days of declines, on expectations of a 1.7 million barrel draw in U.S. crude oil inventories. June WTI gained as much as 1.09% prior to paring gains for a settlement of $49.56 a barrel, up 33 cents, or 0.67%. June Brent tacked on 50 cents, or 0.97%, to settle at $52.10 a barrel.
Despite today’s comeback, this market is still suffering from an oversupply situation, making it a less attractive investment, and in turn, making it difficult for advances to be sustained. Higher U.S. production has so far managed to negate OPEC output cuts and will most likely do so as long as OPEC does not take serious steps to cut output by extending its agreement.
May RBOB closed at $1.623 a gallon, up 0.1%, while May heating oil gained 0.2%, to settle at $1.545 a gallon.
Fundamental News: Bloomberg reported that crude oil stocks held in Cushing, Oklahoma fell by 700,000 bpd to 67.9 million barrels in the week ending April 21st.
Qatar’s Energy Minister, Mohammed al-Sada, is satisfied with the level of compliance by OPEC and non-OPEC producers with an agreement reached last year to cut output.
Russia’s Energy Minister, Alexander Novak, said Russia needs to see more technical analysis of the global oil market and stock levels before deciding to extend an oil supply reduction agreement. Russia’s Energy Minister will hold talks with Russian oil companies this week before his meeting with OPEC and non-OPEC counterparts in Vienna on May 25th. Analysts predict Russia will prolong the cuts, despite the problems this could cause for its largest producers.
Separately, Russia’s Deputy Prime Minister, Dvorkovich, said Russia is ready to maintain its current oil output and may increase it provided there are no risks of price declines. He said a fragile balance has settled on the global oil market.
Azerbaijan’s Energy Minister, Natig Aliyev, said he would discuss a possible extension of the global oil output cut deal at a meeting with his Saudi counterpart on Wednesday.
The head of industry consultant FGE, Fereidun Fesharaki, said the OPEC cuts need to be prolonged until the first half of next year for the goal to be met.
According to Bloomberg, preliminary US waterborne crude imports increased by 1.2 million bpd to 5.5 million bpd in the week ending April 20th. The Gulf Coast saw the largest increase of 878,600 bpd to 3.4 million bpd, while imports to the East and West Coast increased by 7,500 bpd and 335,400 bpd, respectively. Total crude and product imports increased by 718,600 bpd to 7.2 million bpd.
IHS data showed that crude and refined product shipments from the US Gulf reached 4.19 million metric tons on 101 ships in the week ending April 20th.
Shell completed planned maintenance at the Bonga oilfield offshore Nigeria and resumed production on April 8th. The field has the capacity to produce 225,000 bpd of oil and 150 million standard cubic feet of gas.
Pemex completed a $133.5 million hedging program that will give it the right to sell up to 409,000 bpd of oil at $42/barrel from May through December. The program offers Pemex price protection if oil trades between $37-$42/barrel for the rest of the year, which the company said is the most likely bear case for Mexican oil. If oil prices fall to $37/barrel, Pemex would receive the maximum protection under its hedging contracts.
Early Market Call - as of 9:00 AM EDT
WTI - June $49.14, down 42 cents
RBOB - May $1.6000, down 2.16 cents
HO - May $1.5318, down 1.36 cents
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