5 items to understand the oil market

5 items to understand the oil market

"They are trying to find more ways to get prices to stay up, and to understand how the speculative community functions, in the hope that somehow they can find a compromise on how they will allow prices to sit within the $50-$60 band". Bloomberg points out that Goldman Sachs, Morgan Stanley, Bank of America and Citigroup are all sticking to their predictions of moderate price gains this year. For the eleven non-Opec countries that are pledged to cut 558 kb/d of production, there is, as yet, far less data visibility.

The IEA said also that it still expects demand this year to grow by 1.4 million barrels per day, though it says it has changed its forecast to reflect expectations that the demand growth will come slowly and be skewed toward the end of the year.

Goldman Sachs was unfazed by this news, citing Saudi assurances that the uptick in output was diverted into storage, and in any event, it would "be consistent with higher refinery runs locally in February".

Rising U.S. oil production isn't the only thing getting in the way of OPEC's efforts to drain a global glut.

Oil prices extended gains in Asia Thursday as an unexpected drop in USA stockpiles boosted market sentiment.

Overall, OECD stocks jumped for the first time in six months in January, increasing by 48 million barrels to 3.03 billion barrels "and preliminary data for February suggests they have fallen back again only modestly", the IEA said.

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With oil slumping to start 2017, the Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, and other energy ETFs are sagging.

There was a closed door meeting between Saudi officials and executives from top shale producers including ConocoPhillips (COP), EOG Resources (EOG) and Occidental Petroleum (OXY) warning producers that they shouldn't assume the cartel will extend the output cuts. OPEC also flagged rising inventory levels, but raised its estimates for production outside the group and did not see a rebalancing between supply and demand until the second half of this year.

However, Goldman Sachs disagrees, cautioning against assuming the OPEC deal will be rolled over for the rest of 2017. More than 30 supertankers are sitting off the coasts of Singapore and southern Malaysia filled with oil, despite a price structure that makes it unattractive to buy oil now and store it for sale at a later date. USA crude oil production is at the highest level since February 2016. SAUDI OUTPUT UP, BUT NO QUOTA-BUSTING Within OPEC, Saudi Arabia has shouldered the burden of the production cuts, offsetting poorer compliance by other nations. Currently, oil investors face conflicting reports regarding output.

Technically, MCX Crude Oil saw the biggest weekly decline in more than four months, closing the last week near Rs 3,230, down by more than 9 per cent for the period after the price had breached key support near Rs 3,455 level.

USA crude oil imports fell by 565,000 barrels per day to 6.69 million bpd last week, the lowest level in a month, mostly due to large declines from OPEC member countries.

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