Expect crude oil to trade positive: Sushil Finance

Sep 15, 2017, 00:15
Expect crude oil to trade positive: Sushil Finance

"Stronger demand and supply restrictions from OPEC and Russian Federation are the main reasons for the oil price upsurge", said Forex.com analyst Fawad Razaqzada.

Oil prices rose on Thursday, taking USA crude above $50 a barrel for the first time in a month after the International Energy Agency (IEA) forecast the market would continue to tighten as fuel demand increased.

"We don't expect a spike up in prices nor do we expect a big drop in prices".

US gasoline stocks slumped by 8.4 million barrels, the largest weekly decline since the data was first recorded in 1990.

OPEC and other major producers, including Russian Federation, agreed at the end of 2016 to reduce their combined oil output by nearly 1.8 million barrels per day (bpd) to help rebalance the market. As of March 2017, 49% of total US working crude oil storage capacity and more than 40% of working storage capacity for both motor gasoline and diesel fuel were located in the Gulf Coast region.

Should OPEC keep pumping at August's rate, the market would see a small supply deficit next year, versus a 450,000-bpd surplus implied by last month's report. This compared to expectations that inventories would rise by 3-million barrels.

Speaking to reporters after the meeting, Zanganeh said their talks mainly focused on Iran-Venezuela cooperation and the current conditions surrounding the global crude market.

Gasoline producers are looking to replenish inventories after interruptions from Hurricane Harvey.

Notably, U.S. crude is trading below $50.00 per barrel while Brent oil is hovering around $55.00 per barrel. This weekly drop in inventories was smaller than the drop that occurred following a previous outage of the Colonial Pipeline in September 2016, when Lower Atlantic gasoline inventories fell by almost 6 million barrels.

Irma's hit in demand will partly offset the Gulf Coast's interrupted refinery runs, which are taking longer than expected to recover, according to the bank.

Global crude oil prices improved, as OPEC and non-OPEC countries continued to conform to voluntary output adjustments and USA stocks declined further, OPEC said.

If these weren't enough, the U.S. Energy Information Administration lowered its oil production forecast for this year and the next by 1% and 0.7%, respectively.

Neil Atkinson, head of the oil industry and markets division for the IEA, told CNBC that "pretty robust" demand indicates that a rebalancing of the market is "underway".

The US EIA on Tuesday revised its 2017 and 2018 US output forecasts lower to reflect, in part, the effects of Harvey.

It recommended that the USA strengthens its energy security to address events, such as hurricanes, by potentially adding products to government-held inventories.

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