Economy

Oil rises on strong China data, but rising USA output caps gains

Oil rises on strong China data, but rising USA output caps gains

OPEC on Wednesday raised its forecast for non-member oil supply this year to nearly double the growth predicted four months ago as higher prices spur USA shale drilling, offsetting OPEC-led output cuts and a collapse in Venezuelan production. Rising output, as well as seasonally low demand, means that U.S. crude inventories rose by 1.2-million barrels in the week to March 9, to 428-million barrels, the American Petroleum Institute (API) said on Tuesday. That was the fourth straight rise from 870,000 bpd forecast in November. This suggests the efforts by OPEC and Russian Federation to clear the global oil glut by cutting supplies are not working as well as they expected. They have extended the pact until the end of 2018.

Shale oil, which accounts for the majority of U.S. supply, is expensive to produce and is therefore unprofitable when prices are low.

The Iranian oil minister said OPEC could agree at its next meeting in June to start easing the curbs in 2019, the Wall Street Journal reported. "Of course, the reason is because we had some unexpectedly large draws in distillates and gasoline that, when added together, are two times bigger than the crude build", said Bob Yawger, director of energy futures at Mizuho.

Top exporter Saudi Arabia, however, said in February it was premature to discuss an exit strategy.

The industry hopes an increase in jobs will drive higher fuel demand.

Both WTI and Brent Crude Oil are hovering near key 50% levels on the daily chart while trading inside a technical "triangle" chart pattern.

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The first week in January saw the United States producing just 9.492 million bpd.

OPEC also raised its forecast for non-member oil supply to nearly double the growth predicted four months ago.

Falih's comment was in relation to the notion that OECD stocks dropping below the five-year average is more favourable than the swelling of stockpiles that a resumption of full-tilt production - which many OPEC members have signaled is their ultimate intent - would cause. Looking at reactions in markets, crude oil prices fell following the EIA report. The number is believed to be the lowest in decades.

"(It suggests) the rebalancing can't go much further from here and according to the Opec report, demand for Opec'S oil must be 33 million barrels per day for the rest of the year to get rid of any remaining oversupply". "So if inventories declined last week it will definitely be a positive turn", SEB commodities strategist Bjarne Schieldrop said. This means the oil cartel will have to cut about 200,000 barrels a day from its supply. The latest figures gave a mixed picture on stock movements.

Commercial petroleum stocks in the Organization for Economic Cooperation and Development-a group of industrialized, oil-consuming nations that includes the USA -rose in January by 18 million barrels, to 2.871 billion barrels, according to the IEA.

OPEC is now talking of looking at other metrics to assess the market's rate of return to balance.


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