Finance

Oil market likely to slide into deficit in H1: IEA

Oil market likely to slide into deficit in H1: IEA”

"Opec is interested in the highest revenue (price times volume produced and sold), and they aren't necessarily interested in stability, in and of itself", says Hoffman. This represents an increase of 20 million barrels compared to the 2.986 billion barrels seen at the end of 2016 and has stoked fear that OPEC's (and some non-OPEC nation's) efforts to cut production are not yielding fruit. The Organization of the Petroleum Exporting Countries and some non-OPEC producers cut production from January 1 to reduce record stocks of crude.

Crude from Saudi Arabia and other countries around the Middle East Gulf, on the other hand, is mostly denser and contains much more sulfur (giving it an acrid odor).

West Texas crude is showing little movement in the Wednesday session, as WTI/USD stays close to the $48 level. The bullish outlook that prevailed for most of the last few months has been undercut by persistently high inventory figures, and was instrumental in herding speculators to the exits in the latter half of this week. Prices rose 89 cents to US$51.81 yesterday.

Commercial inventories in Organization for Economic Cooperation and Development countries rose in January for the first time in six months, by 1.5 million barrels a day to 3.03 billion barrels. Brazil's oil exports also have been climbing with February exports at a record 1.63 mbpd. Combine this with any rumblings that OPEC may not extend cuts past May 25, and market sentiment remains extremely volatile despite a record number of long positions in the crude market. Meanwhile, given that Libya and Nigeria are exempt, a rebound in their production will increase Opec output even if other members stick to their quotas. The data is current through Tuesday, and captures the entirety of last week's selloff.

US long-dated and benchmark Treasury yields edged lower after the drop in oil prices was viewed as a deflationary sign, but the drop in yields was limited as investors awaited the Fed's policy statement.

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"Nevertheless, prices have undoubtedly been provided a floor by the production accords". Attached the latest status following last weeks report. For crude imports, volumes so far this year are close to 400,000 (kb/d) higher than a year ago; United States crude oil production has increased by 400 kb/d since September; and refinery runs fell from 17 mb/d at the start of the year to only 15.5 mb/d at the beginning of March.

The market remains hyper-focused on US inventory levels, but this number only tells part of the story. The price had hit a three-month low this week on the rising US supply.

A continuation of those factors can "cause oil prices to increase above $60 per barrel by year-end", said Yepez.

The Toronto Stock Exchange's S&P/TSX composite index was up 99.7 points, or 0.65 per cent, to 15,479.31. In Europe, stocks at the Amsterdam-Rotterdam-Antwerp (ARA) are down 9.4 per cent y/y to 46.54 million barrels. Compared with previous year, total non-OPEC supply was 285,000 bpd lower, of which the United States accounts for roughly half, the agency said. Prices were also helped by a weaker dollar in the wake of the Federal Reserve's less-hawkish-than-expected rate announcement.



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