Published: Mon, June 04, 2018
Money | By Ethel Goodwin

Total liquid fuels inventories back to normal in US, OECD

Total liquid fuels inventories back to normal in US, OECD

NEW YORK, June 2 ― Oil prices retreated yesterday after the dollar rose on better-than-expected USA employment data, which pressured greenback-denominated commodities, including crude.

U.S. West Texas Intermediate crude CLc1 fell 48 cents to $66.56 a barrel by 12:03 p.m. EDT [1603 GMT].

For the week, WTI is on track for a 1.5% fall, adding to last week's almost 5% decline, while Brent is set to rise 1.3%, widening the spread between the two benchmarks.

OPEC and its partners made a decision to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.

July WTI crude oil futures are off for the second consecutive day.

The U.S. benchmark traded at a discount of more than $11 to Brent crude for the first time since March 2015.

But as far as John Kilduff, founding partner for Again Capital, is concerned, the big news story for crude and something to monitor "is this emerged disconnect between Brent and WTI: this is a three-year high in the spread differential", he said, referring to Brent's premium over WTI futures remaining near three-year highs above $10 per barrel, having surpassed $11 on Thursday (due partly to a lack of pipeline capacity in the USA keeping a lot of output within the country). It was set for a 0.4 per cent gain for the week.

As a result of the November 2016 OPEC supply agreement, which took effect in January 2017, OPEC member countries agreed to reduce crude oil production by 1.2 million barrels per day (b/d) compared with October 2016 levels and to limit total OPEC production to 32.5 million b/d.

The pricing of WTI and Brent suggest that USA crude is now so cheap compared to its main competitor that refiners across the world, but especially in the main consuming region of Asia, should be snapping up vast quantities.

The premium doubled in about a month as a lack of pipeline capacity in the U.S. traps much of the output inland.

The largest fall in production was registered in Nigeria, according to the survey based on shipping data from external sources, Thomson Reuters flows data, and information provided by sources at OPEC and oil and consulting firms. According to services group, Baker Hughes, another 2 rigs were activated last week to look for oil in the United States, taking the figure to 861 last week, the highest for more than three years.

Still, the incentive to export means the EIA report also showed a surprise decline of 3.62 million barrels in nationwide inventories.

Russian Federation and several other producers agreed to cut output by about 1.8 million barrels per day (bpd) starting from January 2017 which has driven down inventories and raised oil prices.

Like this: