The U.S. Dollar Index and conversations regarding production seem to be helping take WTI crude back above $48 dollars per barrel this morning. Not only is the dollar down, but there is also bullish news surrounding OPEC/non-OEPC production today.
- OPEC News: Iranian oil minister (Brijan Zaanganeh) recently hinted that production cuts would most likely be extended, in order to accommodate the continued supply glut that doesn’t seem quite finished.
- Libyan production is down due to pipeline shutdowns caused by an armed group over wage issues.
- Non-OPEC News: The nation of Azerbaijan says it’s ready to join the (to be determined) next round of production cuts in the second half of the year.
Despite the bearish sentiment today, it is important to remember that we are due for weekly inventory statistics today & tomorrow. Today at 4:30 p.m., statistics will come in from the American Petroleum Institute, which is known for providing statistics that “forecast” the actual statistics, which are provided by the U.S. Department of Energy every Wednesday at 10:30 a.m.
According to Saxo Bank Head of Commodity Strategy Ole Hansen, supply remains ahead of demand as we prepare for another (potential) record-high inventory report to be realized tomorrow. Hansen expects to see an increase of more than 322,000 barrels at Cushing, which would be a new record.
Reuters made a comment this morning in regards to inventory levels at Cushing, which I found to be very informative. They spoke about how rising inventory levels in the U.S. (Cushing, OK) can impact the rest of the global oil market. When there are rising inventory levels at Cushing, this often puts downward pressure on the U.S. benchmark price, which widens the discount to Brent crude (global crude index).
When U.S. crude starts to become considerably cheaper than Brent crude, investors will start to import more crude from the United States. On one hand, it looks good that the U.S. is increasing its exports, but on the other hand this could undermine any OPEC effort to reduce supply in the market.
As of 11:05 AM, the market is up about 3.5 cents on both Heating Oil and RBOB. WTI crude is currently up around 2 percent for the day so far.