Recap: At the onset of trading, oil futures climbed higher on follow through buying from Friday. August WTI reached a high of $45.28, up 31 cents, or 0.6%, while its European counterpart rose 39 cents, or 0.8%, to a high of $47.76. However, the ever increasing number of active US oil rigs, combined with increasing Libyan and Nigerian production is making it difficult for this market to hold onto to gains. Prices came under pressure, falling below unchanged, where they remained for the remainder of the session. August WTI settled at $44.43, down 54 cents, or 0.95%. Brent for August delivery fell 46 cents, or 0.97%, to settle at $46.91.
Brent’s premium over WTI rose to its widest in more than 3 weeks on Monday. This spread hit a low of -$2.50, its lowest level since May 26.
July RBOB fell 0.42 cent, or 0.3%, to $14506 a gallon, while July heating oil declined 1.59 cents, or 1.1%, to $1.411 a gallon.
Fundamental News: Saudi Arabia’s Energy Minister, Khalid al-Falih, said the oil market is heading in the right direction but still needs time to rebalance. He said the oil market is expected to balance in the fourth quarter even as output from Libya and Nigeria as well as from shale oil producers is increasing. He said there was a relatively large draw of around 50 million barrels from floating storage and a decline in industrialized nations’ onshore storage of 65 million barrels compared to July last year.
According to Bloomberg Intelligence, most OPEC countries are failing to comply with the Saudi Arabia-led push to cut output and cut the world’s oversupply. Saudi Arabia produced 9.94 million bpd in May, 178,000 bpd below the mandated level. However, this was not enough to offset a cumulative 397,000 bpd surplus from Venezuela, Iraq and the UAE.
According to the Joint Organizations Data Initiative, Saudi Arabia’s oil exports fell by 226,000 bpd to 7.006 million bpd in April from 7.232 million bpd in March. Saudi Arabia produced 9.946 million bpd in April, up from 9.9 million bpd in March. Saudi Arabia’s crude inventories fell by 3.927 million barrels to 263.927 million barrels in April from 267.854 million barrels in March. Saudi’s local refineries processed 2.651 million bpd in April, up from 2.261 million bpd in March. It also reported that Iraq’s oil exports fell to 3.75 million bpd in April, down from 3.78 million bpd the previous month.
Kazakhstan agreed to the extension of OPEC-led oil production cuts, even as it ramps up its long-delayed Kashagan field, because it’s counting on the deal to increase oil prices.
Libya is producing the most oil in four years after a deal with Wintershall enabled at least two fields to resume production, adding to the challenge that OPEC and allied producers face in trying to pare global crude inventories. Libya’s oil production has increased by over 50,000 bpd to 885,000 bpd.
Angola is scheduled to export 52 cargoes or 1.61 million bpd of crude in August. It is up from 1.55 million bpd in 50 cargoes scheduled for July.
The EIA reported that US refiners imported 62.6 million barrels of crude from Venezuela in the first quarter.
Morgan Stanley analysts stated that OPEC will need to continue its current supply quota for all of 2018 to prevent any inventory increase unless rig counts decline substantially.
Early Market Call - as of 9:00 AM EDT
WTI - July $43.12 down $1.00
RBOB - July $1.4268, down 2.36 cents
HO - July $1.3938, down 1.74 cents
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