OPEC lead production cuts remain overshadowed by robust U.S. production

Market Insights
Heating Oil
February 16, 2018

Recap: Oil prices slipped in overnight trading however, WTI gained has the dollar weakened while Brent came under pressure as OPEC lead production cuts remain overshadowed by robust U.S. production. The early morning sell-off was attributed to Wednesday’s rebound being perhaps a bit overdone. By mid-day, WTI rebounded, reclaiming early losses to trade higher on the day. Brent’s attempt to recapture losses was feeble and this global benchmark ended the session down on the day. April Brent settled at $64.33 a barrel, down 3 cents or 0.05%. March WTI tacked on 74 cents, or 1.22%, to finish the session at $61.34 a barrel. 

March RBOB rose 1.3% to end at $1.7358 a gallon, while March heating oil gained 0.4% to settle at $1.8916 a gallon.

Fundamental News: Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending February 13th fell by 2,831,002 barrels on the week and by 1,783,578 barrels from Friday, February 9th to 32,565,383 barrels. 

Venezuela’s PDVSA is losing workers by the thousands, with as many as 10,000 leaving the company in just one week in January, due to protests against low wages and the increasing risks of accidents due to lack of equipment maintenance.  The situation has escalated to such an extent that PDVSA’s board of directors has stopped accepting letters of resignation.  However, what is worse than the scale of the problem is the qualification of those workers that are leaving, no longer just common laborers but engineers with years of experience.  This will further impact PDVSA, which is already struggling.  With workers leaving, any increase in production is increasingly unlikely to happen. 

According to the Agency for Natural Resources and Energy, Saudi Arabia and the UAE together owned 13.8 million barrels or 2.19 million kiloliters of crude at the end of December in Japan’s semi-national stockpiles, unchanged from the previous month. 

Gasoline stocks held in the Amsterdam-Rotterdam-Antwerp terminal in the week ending February 15th increased by 10.61% on the week and by 5.69% on the year to 1.282 million tons, while gasoil stocks fell by 0.97% on the week and by 0.94% on the year to 3.052 million tons. 

Russia’s Energy Minister, Alexander Novak, said the current price of oil is acceptable for Russia.  He said prices had increased due to a global deal to cut production.  He said oil prices may fluctuate between $50 and $70/barrel this year.

Nigeria’s Oil Minister, Emmanuel Ibe Kachikwu, said he was not concerned by the recent oil price decline and added that OPEC members needed to focus on their production costs.  A Ministry spokesman said Nigeria produces 2.07 million bpd, including 1.71 million bpd of crude and 362,000 bpd of condensates. 

The UAE’s Energy Minister, Suhail al-Mazroui, said oil producers led by Saudi Arabia and Russia aim to draft an agreement on long-term alliance by the year end.  He also stated that OPEC was urging its members to build oil capacity buffers to temper any wild upswings in price due to the weak US dollar this year.   

The compliance rate for the 10 non-OPEC producers participating in oil production cuts fell to 79% in January, the lowest level since July.  This is compared with a revised 81% in December. 

Libya’s crude production increased to 1.1 million bpd, up from 1.05 million bpd a few days ago.  Production from the country’s largest oil field, Sharara, is stable at 290,000 bpd. 

Early Market Call - as of 9:00 AM EDT

WTI - Mar $61.08, down 26 cents 

RBOB - Mar $1.7.325, down 33 points

HO - Mar $1.8955, up 40 points

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