Market Intel

Oil prices slipped in overnight trading after concern over ample supplies of crude oil

May 19, 2017

Recap:  Oil prices slipped in overnight trading, with investors unloading risk amidst heightened concern over political turmoil in Washington and ample supplies of crude oil despite OPEC's efforts to reduce supplies. June WTI fell as much as 2.07%, or $1.02, to a low of $48.05 a barrel. Brent for July delivery dipped to a low of $51.11 a barrel, for a loss of $1.10, or 2.10%. A swift rebound ensued ahead of the May 25th OPEC meeting in Vienna with both crude oil benchmarks trading above the previous day’s highs. June WTI settled at $49.35 a barrel, up 28 cents, or 0.57%, while July Brent gained 30 cents, or 0.57%, to settle at $52.51 a barrel.

June RBOB rose 3.6 cents, or 0.2% at $1.6063 a gallon, while June heating posted a 1.2 cent gain, or 0.8% to settle at $1.5453 a gallon.

Fundamental News:  Algeria’s Energy Minister, Nouredine Bouterfa, said the majority of OPEC members support a proposed extension of a global oil output cut deal by nine months.  He said Algeria was in favor of extending the agreement on output cuts for nine months until the end of March 2018, adding global compliance with the deal, which expires at the end of June was at 95%.

Russia’s Energy Minister, Alexander Novak, said the country is maintaining its oil output cuts at 300,000 bpd, which it reached at the end of April. 

The Kremlin stated that Russian President, Vladmir Putin, and his Venezuelan counterpart, Nicolas Maduro, discussed by telephone the situation on global oil markets, including the agreement between OPEC and non-OPEC producer to cut production.

According to the Joint Organizations Data Initiative, Saudi Arabia’s oil exports in March increased to 7.232 million bpd, compared with 6.957 million bpd in February.  The country produced 9.9 million bpd in March, down from 10.011 million bpd in February. 

The IEA said Venezuela has cut its production more than any other OPEC members in the past year.  Venezuela produced 2.02 million bpd in April, down 310,000 bpd on the year. 

The head of Libya’s National Oil Corp, Mustafa Sanalla, said he was determined to fend off an attempt by the UN backed government to appropriate energy sector powers and said settling a dispute with Germany’s Wintershall over a contract was a top priority.  He said output from the NOC subsidiary, Waha Oil Co, could increase by 80,000 bpd in the coming weeks and that staff had returned to part of the Sirte basin for the first time in more than two years.  National output fell this week due to a power outage affecting the Messla and Sarir oil fields.  Libya’s Oil production partially recovered from 683,000 bpd to 724,000 bpd on Thursday. 

EIA data showed that there were 1.27 million bpd of distillate exports for the week ending May 12th, compared with 1.16 million bpd in the previous week.  

According to shipping data and trade sources, oil tankers carrying about 10 million barrels of US crude are en route to Asia, as US producers take advantage of favorable prices to ship to the region.  The increasing traffic to Asia is possible because of a widening premium for Brent over US crude.   

According to Bloomberg Intelligence, shale producers have become more efficient, with break-evens for Permian and Eagle Ford shale plays being as low as $34/barrel.  Analysts are increasing their growth forecasts for US shale, with Macquarie increasing its US shale growth forecast for December 2016 to December 2017 to 1.4 million bpd from a previous estimate of 900,000 bpd.  JP Morgan Chase raised its forecast by 400,000 bpd to 800,000 bpd for the same period. 

Early Market Call - as of 9:00 AM EDT

WTI - June $50.11, up 76 cents

RBOB - June $1.6270, up 2.04 cents

HO - June $1.5744, up 2.89 cents

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