Strong Draw In Crude Inventories Lifts Oil Prices

Oil prices posted their strongest start to a year since 2014 on Tuesday, with crude rising to mid-2015 highs amid large anti-government rallies in Iran and ongoing supply cuts led by OPEC and Russian Federation.

Since mid-December WTI crude oil has added about $5 a barrel and settled on Wednesday at its highest price in three years at $61.63, and it posted a 52-week high at $62.21 early this morning.

Balancing the trend towards a tighter market is higher production in the United States, where the OPEC-led effort to push prices up is spurring more shale oil output.

But that would nearly certainly leave stockpiles uncomfortably low, send benchmark Brent prices well above $70 per barrel and push the market into a big backwardation.

Newly released data from the United States Energy Information Administration shows oil production in New Mexico booming, propelling the state to the position of third-largest oil producer in the United States in September and October.

The oil market made a modest recovery past year, as production cuts by Opec and its allies helped lift prices.

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"Geopolitical risks are clearly back on the crude oil agenda after having been absent nearly entirely since the oil market ran into a surplus in the second half of 2014", Bjarne Schieldrop, chief commodities analyst at SEB, said, also citing Kurdistan and Libya.

That makes it worth monitoring how the higher excise taxes will impact on volume sales within this year, and if it will really result in the prophetic goal of the DOE of resolving Metro Manila's traffic mess if pump prices will be higher.

Oil hit its highest since May 2015 this week, supported by falling inventories, strong demand and high OPEC compliance.

OPEC led cuts are assisting to reduce global inventories. It's likely that the market will have fully rebalanced by mid-2018, fast-forwarding OPEC's exit from production cuts to the second half of the year, according to Goldman Sachs.

USA crude stockpiles have also dropped by around one fifth since their peak in March and ended 2017 at their lowest level since October 2015. Official data of the U.S. Energy Department will public data and experts on average predict that they will indicate a decrease in stocks by 4.7 million barrels. "People are optimistic that there are some tailwinds behind the underlying crude oil price".

While there is a risk they may take profits after recent gains, potentially pressuring the market if funds sell out of positions, there are reasons to suspect they will not be easily dislodged.

(Copyright © 2015. All Rights Reserved.)
 
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