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CRUDE IN SIGHT

API's 5-million-barrel US crude stock draw report pushes WTI above $64 early Thu - 18 Jan 2018

  • WTI futures had jumped back over the $64/barrel mark early Thursday in Asia in response to yet another significant weekly draw in US commercial crude inventories reported after Wednesday’s market close. Brent was edging up as well but trailing the gains in WTI.
  • The industry body American Petroleum Institute said late Wednesday that US crude stocks declined by 5.1 million barrels in the week ended January 12, the seventh weekly drawdown in a row according to API data and larger than analyst expectations.
  • OPEC’s monthly oil market report out later Thursday is expected to be a major influence on oil market sentiment, especially the data on changes in global oil inventories through the fourth quarter of last year and the organization’s estimates on supply and demand balances through 2018.

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Oil Viewsletter

Three reasons to get on board with the idea of stronger crude - 12 Jan 2018

  • Instead of slipping into correction mode, crude made a dash for new peaks earlier this week. Brent flirted with the $70/barrel mark, while WTI topped $64 in intra-day trade Thursday. Both hit resistance and retreated, but still settled at fresh three-year highs.
  • They were back-pedalling again Friday, but only marginally, compared with their spectacular cumulative rise of a little over 20% in the past three months alone.
  • Opinion remains split between those calling for a correction and those betting on continued strength. But in a market that has fear, FOMO and fundamentals all pulling in the same direction, we wouldn’t hold our breath for a major correction.

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BULLS & BEARS

Market neutral on balance - week of 27 Nov-1 Dec 2017

BULLISH:
  • Expected rollover of OPEC/non-OPEC cuts
  • Anticipated decline in US stocks
BEARISH:
  • Restart of US-Canada crude pipeline
  • US shale patch showing renewed signs of vigour

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ENERGY RADAR

Price rally is sticking but hinges on OPEC/non-OPEC discipline - January 2017

  • With global oil demand growth likely to be tepid again in 2017, the much-awaited market rebalancing hinges on suppliers honouring their commitment to cut.
  • OPEC is not only seeking resurrection, but will be making history if it manages to actually balance crude in the target $50-60/barrel range.
  • US shale patch activity and rig counts picked up through the second half of 2016, but does this mean tight oil production is poised for a rebound?
  • Downside risk to demand growth: Consensus estimates for a 1.35 million b/d rise in global oil consumption this year might be overshooting.
  • A double whammy from rising crude prices and a stronger US dollar to emerging economies could dent demand growth in major consumers such as China, India.

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