Oil steadies as investors weigh up odds of global supply squeeze

08 February, 2019, 00:53 | Author: Darnell Patrick
  • US oil prices edge up as market eyes tighter supply

Inventories of winter fuel in the USA fell more than expected last week as cold polar air blasted the nation, though crude stockpiles rose amid record output, according to the Energy Information Administration.

According to EIA, U.S. crude oil refinery inputs averaged 16.6 million barrels per day last week, which was 170,000 barrels more than the previous week's average.

Crude inventories rose by 2.5 million barrels in the week ended February 1 to 448.2 million, compared with analysts' expectations for an increase of 2.2 million barrels.

"The price has yet to react in any noticeable way", he said.

The Energy Information Administration (EIA) wind of the Department of Energy (DoE) released an increase of 1.3 million barrels into the crude stocks than market consensus of 2.18 million barrels.

U.S. West Texas Intermediate (WTI) crude futures were at $54.77 per barrel at 0223 GMT, up 21 cents or 0.4 percent.

"The fact that USA crude oil and gasoline stocks rose more sharply than expected, as reported by the API after close of trading yesterday, is weighing on prices", said Carsten Fritsch, analyst at Commerzbank.


Gasoline stocks increased by 513,000 barrels, less than anticipated, while distillate stockpiles posted a larger-than-expected drop by 2.3 million barrels.

"The market will struggle to compare disappointing API Inventory numbers against reports of a decrease in Venezuelan output, OPEC cuts, and weak economic data".

The producers known as OPEC+ started cutting production by 1.2 million barrels per day (bpd) from last month to avert a new supply glut, and OPEC has delivered nearly three quarters of its pledged cuts already, a Reuters survey showed last week.

Venezuela, like other OPEC members Iran and Libya, was exempted from making voluntary curbs under the deal on expectations that its output faced involuntary downward pressure in 2019. The global benchmark crude was at an $8.36 premium to WTI for the same month.

Considering the recent pattern of global economics, coupled with negative impact of trade protectionism, chances are high that crude might not recover to its late 2018 highs unless OPEC+ delivers strong cuts going forward. Oil prices fell on Tuesday after a survey showed euro zone business expansion almost stalled in January.

Prices are likely to remain rangebound, or drift sideways to lower until the US and China reach a trade deal.

Trump has vowed to increase US tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent now if the two sides can not reach a deal by March 1.

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