Oil prices weighed down by supply - AmpGFX

Oil prices fell significantly, revisiting lows since November last year as the International Energy Agency (IEA) monthly report noted that the global oil supply rose in May as both OPEC and non-OPEC nations produced more, notes the analysis team at Amplifying Global FX Capital.

Key Quotes

“It said, “Output stood 1.25 mb/d above a year ago, the highest annual increase since February 2016. Gains were dominated by non-OPEC, particularly the US.”

“OPEC compliance with its production cap was good, but output expanded from exempt OPEC producers, Libya and Nigeria.”

“The IEA reported that OECD commercial stocks of oil rose in April by more than the seasonal norm, were above their 5-year average, and have increased since OPEC agreed to cut output in November last year.  The IEA said, “stocks might not fall to the desired level [5-year average] until close to the expiry of the [OPEC production cut] agreement in March 2018.”

“The IEA noted that the production cut agreement is not having as quick an impact as expected, and their comments on rising supply from non-OPEC member, particularly in the USA, suggest that balance may take a lot longer to be achieved.”

“Oil prices fell after the release of the IEA report from the top of the range for the last week to the low side, but they fell further after the weekly USA Energy Information Agency (EIA) Petroleum report.”

“The US data had tended to be more supportive of oil prices since February, showing declining inventories and rising demand for gasoline relative to the seasonal norms.  However this rebalancing has stalled in recent weeks, and inventories remain uncomfortably high.  US oil production continued to grow, although grows has slowed in recent weeks, perhaps in response to weaker oil prices.”

US crude oil inventories remain above the high of the last five years.  They had been declining significantly since March, despite a rising seasonal pattern, closing the gap with the 5-year average.  However, inventories have firmed in recent weeks, widening the gap again somewhat.”

“Gasoline demand had risen relatively rapidly since January, reaching near its seasonal high for the last five years.  However, demand has eased in recent weeks.”

“Gasoline inventory has also risen in recent weeks, to above the seasonal high over the last five years.”

“USA oil production has risen rapidly since October last year, but it does appear to have slowed in the last month.  Perhaps US producers are cooling their heels as oil prices have weakened recently.”