Oil Pulls Back After Major Upside MoveOil declines from recent highs as traders take some profits off the table.
Oil Video 19.05.20.
U.S. Energy Information Administration Cuts Its Domestic Crude Oil Production Forecast
EIA has recently provided its Short-Term Energy Outlook in which it stated that U.S. crude oil production will average 11.7 million barrels per day (bpd) in 2020, down from 12.2 million bpd in 2019.
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Also, EIA expects that U.S. crude oil production will decline by 0.8 million bpd to 10.9 million bpd in 2021.
The recent EIA Weekly Petroleum Status Report showed that domestic oil production has already declined to 11.6 million bpd. However, it will have to decline further to reach an average of 11.7 million bpd for the full 2020 as production started the year at higher levels.
As we have discussed yesterday, U.S. domestic oil production is set to fall further since the number of active rigs drilling for oil keeps falling week after week. Ultimately, the decrease in domestic oil production should lead to a decrease in oil inventories as the demand picks up due to the reopening of the economy.
Oil traders will have an opportunity to take a look at inventory levels today after the stock market close when the API Crude Oil Stock Change will be released. Tomorrow, all eyes will be on the new EIA Weekly Petroleum Status Report.
China’s Oil Demand Gets Back To Pre-Crisis Levels
Bloomberg has recently reported that China’s oil demand has been finally restored after suffering during the acute phase of the coronavirus crisis.
China’s oil demand is important not only because the country is a big oil consumer. Oil traders are looking at the rebound of activity in China to evaluate the potential pace of the rebound elswhere in the world as other economies lift their virus containment measures.
China has recently suffered a setback in its battle against coronavirus as it had to impose lockdown on as much as 108 million people after it found 34 new coronavirus cases in the Jilin province.
It remains to be seen whether the oil market will get seriously worried about this setback. That said, oil traders are not too optimistic on the potential upside from current levels, as WTI December 2020 futures are trading below the $35.00 level, suggesting the upside from current levels may be limited.