Oil slumps on stronger USD and concerns of higher US production
- Oil on the back foot on concerns over higher US production.
- Oil is also under pressure on a surge in USD.
Crude oil/WTI is now trading around 61.55, in New York session, down by 0.36% on stronger USD and concerns of higher US productions ahead of the delayed API inventory data to be released later in the day. On Wednesday, Crude oil prices were undercut by a stronger US dollar and by comments from US Deputy Energy Secretary, who said that the outlook for US oil production in 2018 and 2019 is "phenomenal" due to the shale oil revolution.
EIA (US) inventory data, due on Thursday, is expected to show a rise of 1.3 million barrels in crude stocks for the last week.
The premium of Brent over WTI widened to almost $3.60 a barrel, having neared its narrowest in six months on Tuesday as concerns about a bottleneck of Canadian crude imports underpinned the US crude futures.
Crude oil on Tuesday rallied to 1-1/2 week highs and closed higher on increased compliance with crude production cuts after OPEC Secretary-General Barkindo said OPEC and non-OPEC oil producers reported compliance with their crude production cuts rose to 133% in January. Crude oil also received support from the increase in the crack spread to a 1-week high, which gives incentive for refiners to boost their crude purchases to refine the crude into gasoline.
As par UAE energy minister, OPEC and Non-OPEC producers, including Russia, will discuss extending their existing cooperation for many more years when they meet in June as they seek to avoid major market shocks.
But oil futures prices have also been dented by the physical markets, which are showing signs of seasonal weakness, given that most of the world's refineries are closed, either partially or wholly, to conduct maintenance at this time of the year and cut their crude intake as a result.
The US Dollar rose against major currencies, buoyed by the rise in short-term US government bond yields,as the 2-year note yiel rose to its highest in over nine years and ahead of the release of the minutes of the FOMC’s most recent policy-setting meeting in January which may signal “further” pace of interest rate rises. USD got further boost on early Wednesday Asian session amid renewed jawboning by Japan after its top “FX diplomat” Asakawa said tthat the Yen's recent moves have been one-sided.
Technically, whatever may be the narrative, as par chart pattern Oil now has to sustain above the 62.75 area for a further rally towards the 63.05 and 63.55-64.85 zones in the coming days; else it may again fall to the 61.00-58.00 area again.
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