As Producers Discuss Lower Production They Were In Fact Increasing It

It was a crazy trading day in the energy space, with crude oil reversing gains to take significant hits. As we suggested on Monday morning traders would most likely sell oil as May opened to book profits after a 20% gain in April. WTI oil fell $1.19 to trade at 44.73 while Brent oil fell $1.50 to 45.88.

Data released on Monday showed that global production soared while producers were negotiating to freeze quotas. Reuters reported that oil prices fell about 3 percent on Monday as production from the Organization of the Petroleum Exporting Countries, or OPEC, was close to all time peaks and record speculative buying in global benchmark Brent sparked profit-taking on last month’s out sized rally.

OPEC’s crude production climbed in April to 32.64 million barrels per day, close to the highest level in recent history, a Reuters survey showed.

Iraq’s April exports from southern fields increased, as did seaborne exports from Russia, the biggest exporter outside OPEC. But Iraq — the second largest producer in the OPEC cartel — said it Sunday exported 3.36 million barrels a day last month, according to Bloomberg News, close to the record 3.365 million seen in November.

“Lower output was one of the biggest bullish factors we had back in the first quarter, but as this is something we can’t sustain, the upward momentum in oil prices will slow,” Hong Sung Ki, a commodities analyst at Samsung Futures, said in Seoul.

Traders also cited a bearish stockpile rise of 821,969 barrels at the Cushing, Oklahoma delivery point for U.S. West Texas Intermediate (WTI)crude futures during the week to April 29.

Brent crude rose 21.5 percent in April, its largest monthly gain in seven years. Speculator bets on higher Brent prices reached all-time peaks last week, while bullish bets on WTI futures and options rose to 10-month highs, feeding investor views prices may have risen too far, too fast.

The commodity has surged for four weeks thanks to a weaker U.S. dollar, small indications that the global economy — particularly China — is showing signs of a mild recovery and various disruptions to output including a strike in Kuwait.

However, analysts warned that the gains would be limited owing to still weak demand, the long-running glut and the temporary nature of the disruptions.

Energy data provider Genscape on Monday reported a weekly climb in crude stockpiles of more than 800,000 barrels at Cushing. Phil Flynn, senior market analyst at Price Futures Group, suggested that the rise may be due to the recent flooding in parts of Texas.

Genscape’s numbers on Cushing inventories tend to be “pretty accurate because they are tracking actual pipeline flows,” said Robbie Fraser, commodity analyst at Schneider Electric.

“However, what the market really cares about from the [American Petroleum Institute] and [Energy Information Administration] numbers is the overall crude stock change since that’s more representative of the overall market fundamentals,” he said.

Genscape’s number may roughly match the EIA number for Cushing when it’s released Wednesday, “but that alone won’t tell you if the [EIA] report will be bullish or bearish,” he said.