Over Production Shifts From US Shale To Middle East

According to the EIA, the oil supply situation worsened for the week. If the organization’s estimates are accurate, crude stocks came in at 540.6 million barrels. This represents an increase of 2 million barrels compared to the 538.6 million seen a week earlier and happens to be meaningfully larger than the 1.1 million barrel draw the American Petroleum Institute estimated a day before the release. In the graph below, you can see what the overall trend has been for crude stocks over the past 52 weeks. (Seeking Alpha).

Prices continued to climb seeming indifferent to the climb in the weekly storage report. Oil prices popped up nearly 3% on April 27th and stayed high for the rest of the week after news broke that inventories increased for the week but also in response to positive news regarding production and demand.

Crude oil soared to trade at 46.02 seeing a gain of more than 5% for the week. Brent oil made it to 47.95.

The Energy Information Administration (EIA) reported that production averaged 9.129 million barrels per day in February, down 51,000 b/d from their January estimate. This estimate was basically in-line with the weeklies that were reported for February. The total decline from the peak in April 2015 was 565,000 b/d over the 10-month period.

Information from the EIA suggests that motor gasoline stocks grew by 1.6 million barrels from 239.7 million to 241.3 million. On the good side, motor gasoline is not in a state of glut right now but any build is a negative for the market. Propane/propylene also saw a build, rising by 2.3 million barrels from 68.9 million to 71.2 million, while the “other” category of petroleum products grew by 1.2 million barrels from 246.8 million to 248 million.

Another major positive for oil was news from Baker Hughes in its weekly rig count report that the number of oil rigs in the U.S. came in at 332 for the week. This implies a drop of 11 oil rigs week-over-week and represents a falloff of 51.1% from the 679 oil rigs seen the same week a year ago.

Sputnik International said that global oil prices could sink to as low as $30/bbl. once again as oversupply still lingers, the US dollar might rebound should growth tick up, and energy investors might start cashing out now that oil has enjoyed a bull market.

After oil’s massive 70% rebound from its 12-year low in January to its current price of $50/bbl., global oil prices might post steep declines soon, retreating back to as low as $30/bbl. in the near-to-medium-term. Recent developments in the oil market, including a 20% gain in prices in April alone, might resemble a similar pattern seen in March-June 2015, when crude prices rallied from their multi-year lows only to crash dramatically in the second half of the year amid concerns of global oversupply.

This time around, however, the oil glut remains intact, while US-based shale oil producers have proven resilient to lower revenues, and the recent gains in oil prices are stemming from the dollar’s weakness and assumptions that major oil producing nations could reach an agreement to curb their crude output

The price of oil has increased by more than 50 % in four months, reported Bloomberg. The growth is determined by expectations for the recovery of the balance between supply and demand in the market.