The oil market settled lower yesterday for the second consecutive day after closing Monday at $51.35 per barrel which was the highest level since July 2015. Heating oil and RBOB also finished down $.0205 and .0210 per barrel respectively. The consensus seems to be that the negative pressure of the last two days is again supply glut driven and due to the lack of confidence that traders and analysts have that an agreement on production between OPEC and non-OPEC producers will come to fruition. OPEC members agreed last month to reduce their overall production to a figure between 32.5 and 33 million barrels per day with details to be discussed at OPEC’s next meeting in November. According to the International Energy Agency, OPEC produced a record of 33.64 million barrels per day in September (while demand declined) with much of the overproduction attributed to Saudi Arabia and Iran ahead of the OPEC meeting. Even if an agreement is reached there is great speculation on the overall impact due to the current massive supply overhang. Goldman Sachs told clients earlier this week that despite a production cut becoming a “greater possibility”, markets were unlikely to rebalance in 2017. Rumors and rhetoric will continue to grab headlines as we get closer to the meeting scheduled for November 30th in Vienna, Austria.
The market today is being driven by both the API data and EIA stats released earlier today. Late yesterday afternoon, supply estimates from the American Petroleum Institute showed a larger than expected build of 2.7 million barrels in U.S. crude oil stocks. The API’s also showed a draw of 1.4 million barrels in Cushing, OK which softened some of the bearish impact. Gas builds were 688,000 barrels and distillates drew 4.5 million barrels which was larger than expected. These numbers have been reinforced this morning after the EIA government data reported a build of 4.9 million barrels of crude. This is the first rise in U.S. crude stockpiles in six weeks. While the data differed in gas, the distillate reports were in line with each other with both reporting draws in product. As of 12:00 PM heating oil and RBOB are both trading higher on the NYMEX.