Crude oil prices tumbled during the Asian session after OPEC revised its non-OPEC oil supply forecast for 2018 to the upside. The price of WTI fell by 1.40% to $62.85 a barrel before stabilising above the $63 threshold. The price of Brent followed a similar pattern as it slid to $68.30 before consolidating a few cents higher. In its monthly market report, the oil cartel expects non-OPEC supply growth to reach 1.15 million barrels per day – this is an upward revision of 160k barrels per day compared to previous estimates. This increase in forecast in mostly driven by higher growth expectations for the US and Canada.
On Thursday, the EIA reported that US inventories contracted by 6.9 million barrels from the previous week, while market participants were expecting a smaller decrease of 3.1 million barrels. US stockpiles have been shrinking continuously since April 2017, falling to 413 million barrels compared to 536 million. Yesterday’s surprise reduction was of little help in boosting oil prices, as speculators are already long crude oil (net long non-commercial positions topped 25% of total open interest, according to the CFTC).
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Against the backdrop of higher growth production and faltering demand, the oil outlook remains quite cloudy. The price of black gold has enjoyed a nice ride since last summer as OPEC members trimmed down production. Even though we are not ahead of a massive correction, we believe that the upside is quite limited.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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