Oil falls 1 percent as bullish bets fade with United States output rise

by Ben Pena April 3, 2017, 3:11

While U.S. imports of primarily crude oil from Venezuela have been on the decline, U.S. exports of petroleum products to Venezuela have increased largely because of Venezuelas tight finances that leave it unable to invest and maintain its own domestic refineries. We believe that the overhang of inventories globally will keep prices under pressure in the near term.

The non-Opec part of global supply is the bigger worry for the market at the moment.

If the cartel doesn't extend the deal, the glut may not clear soon, further depressing oil prices and straining the already stretched OPEC producers' budgets. Opec raised its 2017 Non-Opec oil supply growth forecast to 0.4 mbpd (prev. forecast 0.24 mbpd rise). "It seems like there are a lot of people who still have faith in Opec delivering the kind of cuts that would allow prices to increase".

The commodity is still reeling from the pickup in stockpiles, which are casting doubt on whether or not the OPEC output cut is enough to have a lasting impact on prices.

There was also a second successive sharp build in Cushing inventories, although there were more favourable developments surrounding fuel inventories with a further sharp decline in gasoline stocks with distillate also recording a draw on the week. Under the November 30 OPEC agreement, Venezuela agreed to cut its production by 95,000 bpd to 1.972 million bpd beginning in January. Venezuela reported to OPEC - where Venezuela is a founding member - that its production was 2.225 million barrels per day in December 2016.

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Crude oil price continued to fall Wednesday morning ahead of expectations the government will again report record high US inventories for this time of year. The count climbed by 14 to 631, the highest level since September 25, 2015.

Production, on the other hand, has concise figures (two figures each, we might add) published in OPEC's Monthly Oil Market Report-one direct reported figure and one secondary source figure.

Crude oil prices tumbled to $47 a barrel last Tuesday and wholesale gas was at $1.58 last Monday on the New York Mercantile Exchange.

On the inventory side, it remains to be seen if reduced Opec supply leads to significant inventory drawdown in the coming months. There is always conflicting loading data and shipping schedules to contend with, and it's hard to pinpoint precisely how much oil each OPEC nation has heading out the door.

In a key prelude to this morning's Energy Information Administration report, industry group the American Petroleum Institute said US inventories jumped 4.5 million barrels after a brief respite the week before. The exodus of oil-price optimists has begun.

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