Oil Price Digest 26-Jan-17

Crude Oil

The bullish sentiment in the market was clearly underlined today when, in the face of what would be considered as extremely bearish data, Brent only lost 36 cents to settle at $ 55.08/bbl, up 21 cents.  WTI lost 43 cents to settle at $ 52.75 / bbl

We present below some of the DOE stock data information and a small analysis of the situation as we see it.

The first thing to note is that crude has been building.  While it is arguably too early for the production cuts to reflect in the stock data, stocks are still comfortable.  The next point of interest is the fact that refinery runs are at 88.6%.  This means that production is slowing down for whatever reasons. The third point, and the one we have been stressing on a lot is the build in gasoline. The levels of builds at the low levels of production is unprecedented.

In short, the US has no need for additional production of material at this stage.

Now, as the crude supply from the world cuts down, the crude supply in the US is growing.  In addition, the countries kept out of the cut are increasing production.  The rising product stocks round the globe would suggest that there is not additional need for crude elsewhere as well.

Therefore, it is our opinon that the world is currently physically neutral to the cut.  Only time will tell how things proceed from here on.

Naphtha