Why Are Oil Prices Continuing To Rally?

It seems that energy speculators are more positive than most that the June 2^nd meeting will bear fruit after the failure of the April 20^th meeting. Now that the Saudi’s have introduced their Vision2030 economic plan, there is a growing possibility that they might begin to cut production. Today WTI oil soared as high as $45.17 but gave back some of those gains as traders booked profits with oil settling at the 44.5 price level. Brent oil saw gains of 62 cents or 1.38% to trade at 43.22. A hot item from Reuters on Wednesday add more depth to the Saudi conversation.

Saudi Arabia’s sale of a spot crude cargo to an independent Chinese refiner marks a new phase in the turf war for dominance over Asia’s oil market and sends a strong message to its rivals Russia and Iran: the fight for market share is on.

State-owned Saudi Aramco, the world’s biggest oil exporter, this month sold 730,000 barrels of crude for June-loading to Chinese refinery Shandong Chambroad Petrochemicals, one of about 20 independent refineries nicknamed “teapots.” This is Aramco’s first spot sale to a teapot. Russia has filled most of the surging demand from China’s teapots, most of which were only allowed last year to import crude, pushing it to China’s biggest oil supplier in March and in four separate months in 2015, nudging aside the Saudis.

Oil prices pared gains on Wednesday after official data showed US crude oil inventories rose more than expected last week. The US Energy Information Administration said domestic crude inventories rose by 2.0m barrels to 540.6m barrels in the week to 22 April, more than the 1.7m increase expected by analysts.

Crude oil imports fell by 637,000 barrels per day (bpd) to an average of 7.6m bpd last week, the report also showed. US crude oil refinery inputs averaged more than 15.8m bpd, down 257,000 bpd on the previous week.

CNBC printed that oil prices were further underpinned by a weaker dollar that boosted commodities denominated in the greenback. The dollar fell ahead of a policy statement due from the U.S. Federal Reserve decision.

A weaker dollar cuts the cost to non-U.S. investors of buying dollar-denominated assets such as oil futures.

“A weaker U.S. dollar and expectations of stronger fundamentals drove crude oil prices higher. Sentiment continues to improve, with major producer BP suggesting the markets may rebalance by the end of the year,” ANZ bank said.

Brent received extra support from news that Saudi Arabia and Kuwait appear no closer to restarting their jointly operated Khafji oilfield, which produced 280,000 to 300,000 barrels per day before environmental problems forced a closure in October 2014.