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Oil prices turn positive as US crude stockpiles fall by 3.6 million barrels, more than expected

CNBC

Getty Images
Rusted out ‘pump-jacks’ in the oil town of Luling, Texas.

Oil prices edged higher on Wednesday after government data showed U.S. crude inventories fell more than expected after an industry report had indicated a surprise build in fuel stocks.

U.S. commercial crude inventories fell by 3.6 million barrels to a total of 528.7 million barrels in the week through April 21, the Energy Information Administration said. The decline came as refineries hiked output and despite a 515,000 barrels-per-day rise in net U.S. crude imports.

U.S. inventory data issued late on Tuesday by the American Petroleum Institute (API) showed crude stockpiles rose 897,000 barrels, defying expectations of a fall of 1.7 million barrels.

U.S. West Texas Intermediate (WTI) was trading up 22 cents at $49.78 per barrel by 10:38 a.m. ET (1438 GMT), after gaining 0.7 percent in the previous session.

North Sea Brent crude, the international benchmark for oil prices, pared losses to trade down 2 cents at $52.08 per barrel. Brent is about 7 percent below its April peak.

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The line in the sand for crude: Trader

The line in the sand for crude: Trader   

Offsetting the headline crude stockpile data was a rise in fuel inventories, unusual for this time of the year.

Gasoline stocks rose by 3.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 1 million-barrel drop. Distillate stockpiles, which include diesel and heating oil, rose by 2.7 million barrels, versus expectations for a 1 million-barrel drop, the EIA data showed.

U.S. gasoline futures were down 0.7 percent on Wednesday, paring earlier losses and turning positive year to date.

Analysts say lackluster gasoline demand could leave stockpiles of the fuel elevated even through the summer driving season, when consumption surges. That would potentially hurt demand for feedstock crude oil.

Brent and WTI also found support from Saudi Energy Minister Khalid al-Falih, who said he was interested in talks between the Organization of the Petroleum Exporting Countries and non-OPEC producers to stabilize oil prices.

Man who called oil price collapse now sees this

Man who called oil price collapse now sees this   

OPEC and a handful of big producers, including Russia, pledged to cut output by 1.8 million barrels per day (bpd) in the first half of 2017. Gulf and some other producers have indicated cuts could be extended to the end of 2017. An extension will be discussed when OPEC meets in May.

“The market remains heavy with doubts about OPEC’s ability to achieve a successful extension of the current deal with Russia adopting a lukewarm ‘wait and see’ approach,” said Ole Hansen, head of commodity strategy at Saxo Bank.

The average value of the Brent crude forward curve has fallen by over $5 per barrel since the start of the year, when the OPEC-led supply cut started.

The slump in Brent is a result of record crude oil volumes in circulation on ships around the world. Thomson Reuters Eikon shipping data showed 50 million barrels per day were booked for shipment on tankers this month, up 10 percent since December.

— CNBC’s Tom DiChristopher contributed to this report.

Iraq to boost crude oil production

ABC News

Minister: Iraq to boost crude oil production by year’s end

Iraq’s oil minister said on Sunday that his country plans to increase daily crude oil production to 5 million barrels by the end of this year, up from the current rate of about 4.4 million barrels per day, to secure sorely needed cash for its ailing economy.

Iraq, where oil revenues make up nearly 95 percent of the budget, has been reeling under an economic crisis since 2014, when oil prices began their descent from a high of above $100 a barrel. The Islamic State group’s onslaught, starting in 2014, has exacerbated the situation — forcing Iraq to divert much of its resources to a long and costly war.

Addressing an energy conference in Baghdad, Oil Minister Jabar Ali Al-Luaibi didn’t give details on which of the country’s oil fields would supply the increased output.

Late last year, Iraq joined a deal by OPEC and non-OPEC members to lower production for six months by 1.8 million barrels a day in order to prop up global oil prices. The mutual production decrease began on Jan. 1. Iraq’s share in the deal is to reduce output by 210,000 barrels a day to 4.351 million barrels.

“There are positive elements in that deal and we achieved a lot of its targets,” al-Luaibi told reporters on the sideline of the conference. “Work and cooperation are underway … to reach the 1.8 (million barrels a day) reduction,” he added, without divulging whether Iraq is going to support an extension to that deal.

OPEC Secretary General, Mohammed Barkindo, said the compliance among the participants was 86 percent in January and 94 percent in February. Barkindo told reporters that OPEC members would consider whether to extend the production decrease agreement at a meeting next month.

The deal propped up the crude price to around $50 per barrel.

Iraq holds the world’s fourth-largest oil reserves. This year, it added 10 billion barrels, bringing its total reserves up to 153.1 billion barrels.

Al-Luaibi also said that more 15 billion barrels are planned to be added by 2018.

Iraq’s 2017 budget stands at about 100.67 trillion Iraqi dinars, or nearly $85.17 billion, running with a deficit of 21.65 trillion dinars, or about $18.32 billion. That’s based on an estimated oil price of $42 per barrel and daily export capacity of 3.75 million barrels.

Iraq is also grappling with a major humanitarian crisis. The U.N. estimates that more than 3 million people have been forced from their homes since 2014. It also faces growing dissatisfaction among residents of areas recaptured from IS who have had their properties demolished and suffer from scarce public services.

Crude Oil Price Forecast

Oil Has Best Week In 2017 On OPEC Hopes

by  Tyler Yell, CMTForex Trading Instructor

Position Trading based on technical set ups, Risk Management & Trader Psychology.

In a divorce from typical correlations, both US Dollar via the DXY and Crude Oil have found life at the end of Q1 17. Month end flows tend to be erratic, and thus, the broader multi-week trend should take preference over the multi-day move. However, the overall correlation of DXY & USOIL has dropped to a level of near meaningless with a 20-day correlation as of March 30 of -.138.

In addition to the erratic end of month order flow, it’s worth keeping an eye on the headlines for Crude Oil, which have recently touted initial support from OPEC members to extend the cut. The Production, which reached agreement in late November is scheduled to expire in June, but the option to extend the cuts were seen as a possibility if such action would help secure a balancing in the Oil. Given the large rise in Shale production in the US, which has seen a doubling of active Oil rigs since the May 2015 low per Baker Hughes International, a production cut extension from OPEC and likely Russia, could go a long way in putting a higher price floor under Oil.

CRUDE OIL – Technical Analysis: Whether or not Crude Oil is correcting a downtrend or beginning a new rise to 2017 highs is the key questions. The price is at a key juncture whereas a corrective move higher, that would favor new lows would favor price resistance near $52/bbl. Specifically, $51.97 is the 61.8% retracement of the late-February to March range. A turnaround lower below or near $52 that subsequently breaks below $47 would open up a move to the $40-44 zone we’ve long watched as likely support in a more significant downturn.

However, absent the risk of a turnaround lower in Crude, traders should watch for a clean break higher to nullify the view that we’ll see an extension lower. Traders would do well to watch a break above $52 as an argument that Crude may have put in another higher price floor near the 200-DMA ($48.63/bbl.).

Are commodity prices matching DailyFX forecasts so far in 2017? Find out here!

Crude Oil Price Forecast: Oil Has Best Week In 2017 On OPEC HopesChart created using TradingView

The price action in late March has looked like consolidation, but one concern worth mentioning is the strong bounce in RSI(5). The bounce in RSI(5) looks corrective, which favors a trend continuation move lower and possibly to the $44/40 zone in the coming weeks if further weakness surfaces.

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Crude Sentiment Shows Retail Bulls Adding To Longs In Hope Of A Bullish Reversal

Crude Oil Price Forecast: Oil Has Best Week In 2017 On OPEC HopesIG Retail trader data shows 65.1% of traders are net-long with the ratio of traders long to short at 1.87 to 1. In fact, traders have remained net-long since Mar 01 when Oil – US Crude traded near 5433.1; theprice has moved 7.2% lower since then. The number of traders net-long is 12.0% lower than yesterday and 9.5% lower from last week, while the number of traders net-short is 23.2% higher than yesterday and 7.3% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil – US Crude prices may continue to fall. Traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Oil – US Crude price trend may soon reverse higher despite the fact traders remain net-long. (Emphasis Mine)

— Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

Key LevelsOver the Next 48-hrs of Trading as ofThursday, March 30, 2017

Crude Oil Price Forecast: Oil Has Best Week In 2017 On OPEC HopesFor those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours of trading.

Oil rallies to 3-week high as traders cheer U.S. supply data

MARKET WATCH

Bloomberg News/Landov
A crude oil storage tank at Cushing storage terminal in Cushing, Oklahoma
By

MyraP. Saefong

Markets/commodities reporter

SaraSjolin

Markets reporter

Oil prices rallied Wednesday, settling at their highest level in roughly three weeks after data from the Energy Information Administration showed a weekly rise in U.S. crude inventories that was below some market forecasts, along with bigger-than-expected declines in gasoline and distillate stockpiles.

Disruptions to crude output in Libya, as well as hopes for a six-month extension to the production cut agreement, led by the Organization of the Petroleum Exporting Countries, added further support to oil prices.

Combined, the upbeat factors “offered the market a touch of optimism that perhaps things are headed in the right direction for global balance,” said Jenna Delaney, senior oil analyst at Platts Analytics, a unit of S&P Global Platts.

May West Texas Intermediate crude CLK7, +0.71%  rose $1.14, or 2.4%, to settle at $49.51 a barrel on the New York Mercantile Exchange. The contract settled at its highest level since March 9, according to FactSet data. May Brent LCOK7, +0.17%  gained $1.09, or 2.1%, to $52.42 a barrel.

The EIA reported that crude inventories rose by 900,000 barrels to a weekly record 534 million barrels for the week ended March 24. But that rise was less than half the 1.9 million-barrel climb posted by the American Petroleum Institute late Tuesday.

Analysts polled by S&P Global Platts forecast a climb of 300,000 barrels, while others expected an even larger increase, with Citi Futures forecasting a 2 million- to 3 million-barrel rise.

“An extremely big jump in refinery activity on the Gulf Coast, a tick lower in imports and a rebound in exports has led to a lower-than expected-build to crude inventories,” said Matt Smith, director of commodity research at ClipperData. But that’s “an increase nonetheless—lifting oil inventories to a further new record.”

Still, Phil Flynn, senior market analyst at Price Futures Group, pointed out that supplies in the Strategic Petroleum Reserve fell by more than 700,000 barrels and “if you add that to commercial-oil inventories, the increase in supply looks smaller.”

The EIA also said gasoline supplies dropped 3.7 million barrels, while distillate stockpiles fell 2.5 million barrels last week. The Platts survey forecast a fall of 2.1 million for gasoline and decline of 1.1 million for distillates.

On Nymex, April gasoline RBJ7, +0.53%  rose 3.7 cents, or 2.3%, to $1.672 a gallon, while heating oil for the same month HOJ7, +0.51%  gained 2.6 cents, or 1.7%, to $1.543 a gallon.The feud between Iran and Saudi Arabia intensified at the start of last year, but the two nations have since made moves to bridge their longstanding divide.

Elsewhere in energy trading, natural gas for April US:NGJ17  ended at $3.175 per million British thermal units, up 7.9 cents, or 2.6%. The contract expired at the day’s settlement.

The EIA will issue its weekly update on U.S. natural-gas supplies Thursday, with an S&P Global Platts survey of analysts forecasting a decline of 43 billion cubic feet.

Daily FX

Crude Oil Price Forecast: Oil To 200DMA On Libya’s Force Majure Claim

Crude Oil has shown volatility on Tuesday afternoon ahead of the DoE data on news that Libya’s largest Oil field confirmed Force Major and will bring production in Libya down to 560,000 barrel a day from its previous range of 700-800k. The closed pipeline accounts for ~20% of Libya’s output, and early reports are blaming fighting between armed forces as the reason for closure, but there has not been confirmation. The welcomed news will contend with Wednesday’s US production data, which is expected to further add to the fear that oversupply will weaken OPEC’s efforts.

On the charts, the technical focus has solely been on the 200-DMA, which has historically been a key divisor of the market between Bullish and Bearishness. The 200-DMA currently sits at $48.62/bbl as of Tuesday afternoon and price looks set to push lower.

Are commodity prices matching DailyFX forecasts so far in 2017? Find out here!

Crude Oil Price Forecast: Oil To 200DMA On Libya’s Force Majure ClaimChart created using TradingView

The price action in late March has looked like consolidation, but one concern worth mentioning is the strong bounce in RSI(5). The bounce in RSI(5) looks corrective, which favors a trend continuation move lower and possibly to the $44/40 zone in the coming weeks if further weakness surfaces.

The price zone in focus if we continue under the 200-DMA encompassing the 38.2-50% retracement of the February-January price range that also houses the November low and the Median Line of Andrew’s Pitchfork drawn off the key pivots in mid-2015 through February. The zone is $44/$40.57. Naturally, a break back above the 200-DMA that aligns with USD-weakness (CL1 to DXY 20-day correlation is -.256) would help turn the focus higher toward the $55/57 zone.

Interested in Joining Our Analysts, Instructors, or Strategists For a Free Webinar? Register Here

The price of Crude Oil recently traded below the 200-DMA with RSI(5) registering a bearish extreme. If the price pops higher as it did in April, August, and November of last year, the Bulls may feel as though they have dodged a bullet. However, the Crude Oil market does not have the fundamental support that other commodity sectors like base metals have, which could lead to an eventual breakdown toward the November low of $43.75/42.25.

Wednesday’s US Production data, which recently showed stockpiles at record highs will continue to stoke worries about increasing oversupply alongside a lack of buying pressure. When combining those two components alongside sentiment, it’s my preference to favor a further drop in Crude Prices or at least a further drift sideways as the forwards curve show.

CrudeSentiment Shows Retail Bulls Holding On To Longs In Hope Of A Reversal

Crude Oil Price Forecast: Oil To 200DMA On Libya’s Force Majure ClaimIG Crude Oil retail trader data shows 74.4% of traders are net-long with the ratio of traders long to short at 2.9 to 1. In fact, traders have remained net-long since Mar 01 when Oil – US Crude traded near 5433.1; theprice has moved 11.0% lower since then.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil – US Crude prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil – US Crude-bearish contrarian trading bias. (Emphasis Mine)

Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

Key LevelsOver the Next 48-hrs of Trading as ofTuesday, March 28, 2017

Crude Oil Price Forecast: Oil To 200DMA On Libya’s Force Majure ClaimFor those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours of trading.

Contact and follow Tyler on Twitter: @ForexYell

Oil prices finished slightly higher Friday, but logged their third weekly loss in a month.

5 key signatories to the OPEC output deal meet in Kuwait on Sunday

Reuters
Comments from Saudi Arabia are giving oil prices a bump higher on Friday
By

MyraP. Saefong

Markets/commodities reporter

SaraSjolin

Markets reporter

Oil prices finished slightly higher Friday, but logged their third weekly loss in a month.

Traders continued to weigh signs of OPEC-led cutbacks in global crude production ahead of a meeting of oil producers this weekend, against data pointing to the likelihood of further gains in U.S. output.

May West Texas Intermediate crude CLK7, +0.92%  rose 27 cents, or 0.6%, to settle at $47.97 a barrel on the New York Mercantile Exchange. It touched intraday highs above $48 early Friday following news that Saudi Arabia said it cut oil exports to the U.S. in March by around 300,000 barrels a day.

For the week, May WTI oil futures saw a loss of about 1.7% from the week-ago settlement of $48.78 for the April contract, which was the front month at the time. The May contract itself lost 2.7% for the week, according to FactSet data.

May Brent crude LCOK7, +0.81%  added 24 cents, or 0.5%, to $50.80 a barrel—for a weekly loss of about 1.9%.

For the session, “oil managed to rebound not because of an uptick in buyer interest, but because of book-squaring into this weekend’s OPEC gathering,” Tyler Richey, co-editor of the Sevens Report, told MarketWatch.

Five representatives of the countries that signed up to the output agreement—Kuwait, Algeria, Venezuela, and non-OPEC nations Russia and Oman—will meet in Kuwait on Sunday to review the current level of compliance. Most members of the Organization of the Petroleum Exporting Countries are adhering to their pledges to make cuts, but data suggest not all non-OPEC producers are sticking to their quotas.

If OPEC says ‘something crazy while electronic markets are closed between now and Sunday night, it could cause futures to gap higher at next week’s open.’

Tyler Richey, Sevens Report

“There is no question that OPEC is losing its grip on the market, but if they say something crazy while electronic markets are closed between now and Sunday night, it could cause futures to gap higher at next week’s open,” Richey said.

But then there’s the U.S., which isn’t part of the agreement.

“OPEC has done their part, but U.S. inventory data is still rising, keeping the lid on the oil price,” said Naeem Aslam, chief market analyst at Think Markets.

Data on the number of active U.S. oil rigs from Baker Hughes BHI, -0.29%  released Friday revealed a rise of 21 to 652 rigs this week—suggesting the likelihood of a rise in domestic production to come. The oil rig count has climbed every week this year so far, except for one.

Oil prices have been under pressure for most of the week, as U.S. stockpiles hit a record, based on weekly data from the EIA going back to 1982.

Read: Past oil spending could make for glut next year: Goldman Sachs

Also see: Explaining why some say Keystone will create thousands of jobs, and others say 35

Elsewhere in the energy spectrum, gasoline for April RBJ7, +1.34%  settled up 1% at $1.605 a gallon, to end the week up 0.4%, while April heating oil HOJ7, +1.12%  added 0.5% at $1.498 a gallon, down about 0.7% for the week.

Read: Gasoline prices notch smallest price move in 8 years

Natural gas for April NGJ17, +0.98%  added 0.8% to $3.076 per million British thermal units—settling about 3.4% higher for the week.

Oil ends lower as April contracts expire ahead of U.S. crude-supply data

MARKET WATCH

Trades look for hints on potential for OPEC output cut extension

Shutterstock/zhengzaishuru

By

MyraP. Saefong

Markets/commodities reporter

RachelKoning Beals

News editor

Oil prices settled lower Tuesday in volatile trading tied to the expiration of the April futures contracts, ahead of data expected to reveal a rise in weekly U.S. crude supplies.

Traders also kept an eye out for hints on whether the Organization of the Petroleum Exporting Countries will extend the production-cut agreement between its members and other major producers beyond June. OPEC sources have indicated that members increasingly favor an extension but want the backing of non-OPEC oil producers, which have yet to deliver fully on existing cuts.

April West Texas Intermediate crude CLJ7, -1.49% declined by 88 cents, or 1.8%, to settle at $47.34 a barrel on the New York Mercantile Exchange. The contract, which expired at the settlement, finish at their lowest level since November, according to FactSet data. May WTI CLK7, -0.58% which is now the front-month contract, shed 67 cents, or 1.4%, to finish at $48.24 a barrel.

May Brent crude LCOK7, -0.51% lost 66 cents, or 1.3%, to $50.96 a barrel on the ICE Futures exchange in London.

“WTI crude oil was unable to hold on to early gains despite a falling U.S. dollar providing support to commodity prices in general,” Colin Cieszynski, chief market strategist at CMC Markets, told MarketWatch.

“Given the high volatility and big surprises in both directions of the last three weeks, it appears some traders may be going to the sidelines ahead of the [supply data] news, while others may be expecting a big build after last week’s surprise decline,” he said.

Petroleum inventory data are due out from the American Petroleum Institute late Tuesday and Energy Information Administration early Wednesday. Analysts surveyed by S&P Global Platts forecast a climb of 2 million barrels in crude inventories for the week ended March 17.

“A lot of the recent volatility in oil has been around traders trying to figure out if the big build we saw in U.S. inventories in the winter is over or not,” said Cieszynski. EIA data released last week showed the first decline in crude stockpiles in 10 weeks.

The world’s biggest crude exporter is conceding ground to shale producers in the U.S., people familiar with current Saudi policy said. Saudi Arabia’s crude exports to the U.S. for the week ended March 10 fell by 426,000 barrels a day compared with the previous week, according to U.S. data.

Elsewhere in energy trading, April gasoline RBJ7, -0.28%  fell by 0.4% to $1.605 a gallon, while April heating oil HOJ7, -0.39%  lost 0.7% to $1.503 a gallon.

April natural gas NGJ17, -0.32%  settled at $3.093 per million British thermal units, up 1.7%.

US crude oil up 2.4%

US crude settles at $48.86, up 2.4% on stockpile drop, snapping 7-session losing streak

Futures Now: Crude oil breaks losing streak

Futures Now: Crude oil breaks losing streak   

Oil prices rose more than 2 percent Wednesday, lifted by a surprise drawdown in U.S. crude inventories and data from the International Energy Agency (IEA) suggesting OPEC cuts should create a crude deficit in the first half of 2017.

Data from the U.S. Energy Information Administration (EIA) showed U.S. crude stocks fell last week, dropping after nine consecutive increases.

Inventories fell by 237,000 barrels in the week to March 10, compared with analysts’ expectations for an increase of 3.7 million barrels.

The IEA said global inventories rose in January for the first time in six months despite OPEC output cuts, but said if it stuck to its production curbs the market should see a deficit of 500,000 barrels per day (bpd) in the first half.

“For those looking for a rebalancing of the oil market the message is that they should be patient, and hold their nerve,” the IEA said in its monthly report.

Futures Now: Crude oil breaks losing streak

Futures Now: Crude oil breaks losing streak   

U.S. West Texas Intermediate crude ended Wednesday’s trade up $1.14, or 2.4 percent, at $48.86, snapping a seven-session losing streak.

Brent futures were up 83 cents, or 1.6 percent, at $51.75 a barrel by 2:39 p.m. ET (1839 GMT). Prices had hit a three-month low of $50.25 during the previous day’s trading.

Prices extended gains after the U.S. Federal Reserve raised interest rates in a widely anticipated move that sent the dollar index lower. A weaker greenback makes dollar-denominated crude oil more affordable to holders of other currencies.

EIA also reported gasoline stocks fell by 3.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 2 million-barrel drop. Distillate stockpiles, which include diesel and heating oil, were down 4.2 million barrels, versus expectations for a 1.7 million-barrel drop.

Earlier, the IEA reported global inventories rising in January for the first time in six months despite OPEC cuts since Jan. 1, but said if OPEC stuck to limits the market should see a deficit of 500,000 barrels per day (bpd) in the first half of 2017.

“As long as OPEC stays on track and non-OPEC delivers on their agreed cuts, the market will continue to balance,” said Ole Hansen, head of commodity strategy at Saxo Bank.

The Organization of the Petroleum Exporting Countries said at the end of November it would cut 1.2 million bpd during the first half of 2017, and then in December reached a deal with non-OPEC producers to cut about 600,000 bpd from their output.

Matt Smith: US inventory at record highs

Matt Smith: US oil inventories at record highs   

Despite OPEC compliance with its share of the cuts, stockpiles have continued to rise, in part because OPEC members pumped heavily before cuts kicked in and also because U.S. shale producers have raised output as Brent spiked above $58 in January.

Last week, prices plummeted more than 5 percent, the biggest drop in a year, as U.S. crude inventories surged much more than expected to a record high.

“While such patience (counseled by the IEA) may indeed benefit longer-term investors it may not be much help for money managers facing year-to-date losses on long positions, whether longer-term holdings benchmarked to the December 30 Brent closing price of $56.82 or purchased over the long period of range trading over the first ten weeks of the year,” Tim Evans, Citi Futures’ energy futures specialist, said in a note.

“Surplus inventories and rising U.S. production may be more of a worry to them.”

On Tuesday, prices had been hit hard by an OPEC report showing a rise in global crude stocks and a surprise output jump from OPEC’s biggest member, Saudi Arabia.

Secondary sources had said Saudi output fell in February to 9.797 million barrels per day (bpd), but Riyadh told OPEC it rose to 10.011 million bpd.

Saudi Arabia played down the figures, saying its supplies to the markers were effectively stable during January and February.

— CNBC’s Tom DiChristopher contributed to this report.

Oil Bulls Blink After Months of Attempts to Boost Crude Prices


FILE - An oil storage tank and crude oil pipeline equipment is seen at the Strategic Petroleum Reserve in Freeport, Texas, U.S., June 9, 2016.

FILE – An oil storage tank and crude oil pipeline equipment is seen at the Strategic Petroleum Reserve in Freeport, Texas, U.S., June 9, 2016.

Oil bulls trying to push the crude market higher finally waved the white flag Wednesday, triggering the biggest rout in a year on concerns that stubbornly high inventory levels would persist despite supply cuts.

Prices had been locked in the tightest trading range in over a decade as traders and speculators piled into bets that oil prices would rise after the world’s top producers cut output.

For weeks, they shrugged off record high inventories in the United States until Wednesday, when the market finally blinked.

Global oil benchmark, Brent and U.S. crude’s West Texas Intermediate prices plunged more than 5 percent — the biggest drop since February 2016 — an unwelcome reminder of the darkest days of a two-year price war that left many U.S. shale producers with beleaguered balance sheets.

The move also lifted trading volumes to the highest since early December, with over 430,000 contracts in Brent crude for May delivery and more than 911,000 contracts of WTI for delivery in April changing hands.

The selloff continued Thursday, as U.S. crude hit a low of $48.79 a barrel in early trading, its first drop below $50 all year, while Brent crude touched a low of $51.60 a barrel, its lowest since Dec. 1.

Industry players were divided on whether the price slide would continue or be short lived, given producers’ adherence to a pledge to rein in output and prop up prices that have languished for over two years owing to a glut.

“The high level of uncertainty that has kept the oil complex trading in a relatively narrow trading range since late last year has been replaced, at least for the moment, by a bearish market sentiment,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

“The discussion will now center around whether or not Saudi Arabia is willing to give back market share to U.S. producers … or are they ready for yet another round of the market share war.”

So far, there has been no indication that Saudi and OPEC would extend the cuts beyond what is announced or allow the U.S. to claw some of its market share.

Suhail bin Mohammed al-Mazrouei, energy minister for the United Arab Emirates, told Reuters on the sidelines of an industry conference in Houston that the plunge in oil prices was temporary and prices would rise as OPEC complies with output cuts.

Still, the rise in inventories was “a worry,” he admitted.

Despite record exports in U.S. crude oil, inventories have ballooned to a new high week after week, threatening a speedy rebalancing of the market.

Saudi Oil Minister Khalid al-Falih even admitted on Tuesday inventory drawdowns were taking longer than he had expected for the first two months of the year.

The crash Wednesday also tested key technical levels of support established this year and dropped below their 100-day moving averages — a key metric for chart watchers — for the first time since the OPEC deal was announced.

“The move down is in oversold territory, but otherwise, there is very little evidence that it will end,” Dean Rogers, senior analyst at Kase & Company, said of WTI.

A small upward correction might take place first, but odds strongly favor a continued decline toward the next major target at $48, he said, adding that for Brent, the move lower is poised to continue to at least $52.60 and likely $51.60 and lower over the next few days.

Still, for the long term, most market participants continue to remain bullish.

Trade in options — that give the holder the right to buy or sell at a specific price — signaled that the market does not expect prices to move much lower than current levels.

“Their [OPEC’s] response may very well be a continuation of cooperation to limit their oil production, perhaps for a little longer than they had hoped and this should help keep a floor under oil prices,” said Fawad Razaqzada, technical analyst at forex.com.

“Indeed, despite today’s sharp selloff, I remain bullish on oil and still expect to see $60-$70 a barrel by the year end.”

Oil Price falls below $50

Oil price falls below $50 as U.S. supplies hit record

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The price of U.S. crude oil has dipped below $50 for the first time since December as a global supply glut persists despite production cuts by big exporters.

In November, the Organization of Petroleum Exporting Countries and other oil-producing nations agreed to lower their output for much of 2017 to rein in chronic oversupply and to boost prices. But drilling and stockpiles of oil have continued to rise, particularly in the U.S.

West Texas Intermediate (WTI) oil, the U.S. benchmark, fell $1.23 a barrel to $49.05 on Thursday, and is down 9% in March.

Brent crude oil, the benchmark for international oils, declined 54 cents a barrel to $52.57.

U.S. commercial crude supplies have risen for nine straight weeks, reaching a record 528.4 million barrels last week, according to the U.S. Energy Information Administration. That was an increase of 8.2 million barrels from a week earlier.

“The rising crude inventory levels in the US to new all-time highs has been the No. 1 reason why prices have been unable to move further higher,” Fawad Razaqzada, market analyst at Forex.com, wrote to investors Wednesday.

The effects of lower oil prices have reverberated through the economy. Prices at the gas pump have fallen since early January, putting more money into drivers’ pockets. The average U.S.gas price peaked this year at $2.38 on Jan. 8, but has since fallen to $2.30, according to GasBuddy.com.

As the weather warms up and more Americans hit the road for spring break and summer, prices typically rise about 60 cents a gallon from mid-February to June 1, says Patrick DeHaan, senior petroleum analyst at GasBuddy. “This year, if (the oil price) drop sticks around, we could see far less of a rally. It could be even half of that,” he said.

That same drop, however, has caused pain in other areas. Shares of oil companies have sagged in recent weeks as analysts’ cut their earnings predictions for the industry. The S&P 500 Energy Index is down 8.5% for the year. ExxonMobil’s stock opened at a 52-week low Thursday, though it rebounded later and finished up 0.8% for the day.

So far, any signs that domestic stockpiles and production could wane have been faint. The Trump administration has been vocal about its desire to remove regulations that hinder U.S. production. And that “could see a surge of domestic crude driving down prices even further,” said Alfonso Esparza, market analyst at brokerage firm OANDA.

U.S. oil output is expected to increase to an average of 9.7 million barrels per day in 2018, with more production in the Permian shale region of Texas and New Mexico, as well as the Gulf of Mexico, expected, according to the U.S. Energy Information Administration.

“U.S. crude oil production is now expected to reach an all-time high in 2018,” Howard Gruenspecht, acting administrator of the E.I.A., wrote in the agency’s March 2017 Short-Term Energy Outlook. “Rising crude oil production from non-OPEC countries, especially from the United States, is expected to curb upward pressure on oil prices for much of 2017.”

Despite the sell-off Thursday, Razaqzada, the analyst at Forex.com, said he expected oil prices to rebound to the $60 to $70 range by the end of the year.

Demand typically rises in the summer, and some analysts expect the effects of OPEC-led supply cuts, which went into effect Jan. 1, to become more noticeable later this year.