By TZ Business News Staff and Agencies.
Russia is turning into an extremely useful accessory in the stabilization of world crude oil price, tipping off effects of US shale production. Oil has had a rough ride lately, losing 15% over the past three months, but there is optimist linked to Russia.
“Jumping to the conclusion the market is now unilaterally bearish may be premature,” BNP Paribas strategists say. This is according to Market Watch.
Russia is a core reason for optimism in the rationale from BNP’s Harry Tchilinguirian and Gareth Lewis-Davies. They expect the country — a key player in keeping the global oil balance in check — will likely play along with an extension of OPEC-led supply cuts, something the market wants badly.
“The combined OPEC/Russia output restraint should allow the market to make progress on the re-balancing front,” the strategists say.
Other positives they see: Oil demand is expected to rise in the third quarter and supply growth should turn to contraction in some key non-OPEC countries, such as Canada and Brazil. (That’s even if growth in U.S. and Libya supply is taken into account.). Even Jeff Currie, head of global commodity research at Goldman Sachs, seems to think that there may be too much pessimism out there.
CNBC reported this second week of May, 2017, oil prices are surging right now after an energy report showed falling stockpiles and greater demand. U.S. West Texas Intermediate futures rocketed above $47 a barrel after US government data showed a big drop in the U.S. crude inventories. Gasoline demand also recovered from a recent weak spell, driving up U.S. gasoline futures.
Oil prices surged as much as 4 percent after the latest report on U.S. crude stockpiles eased fears that have permeated the market in recent weeks, helping to drag prices to nearly six-month lows. U.S. West Texas Intermediate futures rocketed back above $47 a barrel and international benchmark Brent topped $50 after the Energy Information Administration reported a much larger drop in the nation’s crude stockpiles and a strong rebound in gasoline demand.
WTI posted its best performance since Dec. 1, one day after the Organization of the Petroleum Exporting Countries agreed to cut their production to reduce brimming global crude stockpiles. That marked a sharp reversal from the recent trend, which has seen oil prices crash through a number of technical levels to fall as low as $43.76.
Oil prices had already been trading higher on a report that Saudi Arabia was cutting exports to the key Asian market and on earlier industry data pointing to a sharp decline in weekly U.S. inventories.
“The EIA numbers came in bullish across the board,” Roberto Friedlander, head of energy trading at Seaport Global Securities said in a research note.
U.S. commercial crude inventories fell by 5.2 million barrels, versus estimates for a 1.8 million barrel decline. This occurred as refinery activity eased from recent elevated levels and oil imports dropped by 644,000 barrels a day.
Gasoline demand rose by 252,000 barrels a day, bringing the four-week average closer to levels at this time last year after a string of data showing weekly consumption declines. While gasoline in storage did not decline as much as analysts anticipated, it did not rise as indicated in the earlier industry report.
U.S. gasoline futures, which have slumped about 12.5 percent over the past 4 weeks, were up 3.3 percent on Wednesday, [May 10, 2017]. Stockpiles of distillates, which include diesel and home heating fuel, fell more sharply than expected, as well.
“Crude prices continue to be sensitive to headlines surrounding U.S. production growth and OPEC output cuts, despite the fact the market largely expects those dynamics to persist,” Jenna Delaney, senior oil analyst at Platts Analytics said in a written briefing on the EIA numbers.
“Going forward, the question will be whether these factors will result in draws in global inventories during the remainder of 2017, which are most visibly seen through U.S. inventory data.”