Market Intel

An anticipation of a draw down in U.S. crude oil inventories caused oil prices to rise

Dec 06, 2017

Recap: Oil prices rose on Tuesday in anticipation of a draw down in U.S. crude oil inventories, amid strong demand and OPEC lead efforts to sop up excess global supplies. January WTI gained as much as 0.78%, as it rose to a high of $57.92, while Brent for February delivery hit a high of $63.15, up 1.12%. Gains were pared ahead of the API report, with spot WTI finishing at $57.62 a barrel, up 15 cents, or 0.26% and spot Brent tacking on 41 cents, or 0.66%, to settle at $62.86 a barrel. 

January RBOB rose 1.6% at $1.718 a gallon, while heating oil for the same month ended at $1.914 a gallon, up 1.

Fundamental News: Crude oil stocks held in Cushing, Oklahoma fell by 2.4 million barrels to 55.9 million barrels in the week ending December 1st. 

The IEA’s Head of the Oil Industry and Markets Division, Neil Atkinson, said oil prices may decline in the coming months. 

Bloomberg reported that preliminary US waterborne crude imports increased by 416,900 bpd to 4.7 million bpd.  Imports to the Gulf Coast increased by 326,100 bpd to 2.7 million bpd while imports to the East Coast and West Coasts increased by 40,600 bpd and 50,200 bpd, respectively. 

According to data from cFlow, S&P Global Platt’ trade flow software, distillates flows fixed to Northwest Europe and the Mediterranean from the US Gulf Coast for December are currently around 550,000 metric tons. 

According to Bloomberg, OPEC’s output in November fell by 80,000 bpd to 32.47 million bpd.  It is the lowest level in six months, led by declines from Angola and Kuwait.  OPEC’s compliance increased by 8% on the month to 118% in November. 

The UAE’s crude oil output in November fell to about 2.9 million bpd as the country looks to increase its compliance with a global pact to cut production.  The UAE reported output of 2.95 million bpd in October.  UAE shipments of crude and condensate fell to a seven month low in November as the country joined OPEC and other producers in extending restrictions.  The UAE’s shipments fell to 2.313 million bpd in November from a revised 2.531 million bpd in October.

Indonesia’s Deputy Energy Minister, Arcandra Tahar, said the country will keep a freeze on its membership of OPEC.  Indonesia’s OPEC membership was suspended in December 2016, less than a year after it rejoined the group. 

Goldman Sachs forecast that oil prices will retain their strength, at least through 2018.  It raised its forecast for WTI and Brent to $57.50/barrel and $62/barrel, respectively, saying OPEC and its allies showed a stronger commitment than expected to extending their output cuts.  It expects positive total returns of 9% from crude over the next 12 months.  Goldman Sachs, however, said that by 2019, it believes the response of shale and other producers to higher prices will incentivize OPEC and Russia to pare back their now greater spare capacity, leaving risks to prices skewed to the downside. 

Early Market Call - as of 9:00 AM EDT

WTI - Jan $56.85, down 76 cents

RBOB - Jan $1.7000, down 1.85 cents

HO - Jan $1.8936, down 2.01 cents

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