Oil Price Digest 27-Mar-17

• That there is currently no shortage of curde oil is plain to see
• However, refinery run rates are low currently.
• The continuous product draws over the past few weeks imply that refineries will have to increase production levels to meet stock demand for gasoline in the driving season.  If cracks do not support the cause of ramping up production today, they will do so eventually.
• That in turn will increase crude consumption i.e. demand for crude.
• However, the fact that Shale Oil is going to burgeon is also painfully evident.
• Whether this production rise is sufficient to meet the requirements of refineries coming out of winter turnaround is a question to wonder about.
• Further this shortage will have to continue beyond a mere 3 months, that is the period of production cut arrangement that is left.
• So will OPEC do it?
• More importantly, will Saudi continue to hold it production to nearly 9 million barrels per day, way beyond its committed output cut not only for now, but also beyond June?

These are all the questions which the weekend conclave was expected to answer.

What it did was state it will ‘request a technical committee and the OPEC secretariat to review the market conditions and revert… in April 2017 regarding the extension of the voluntary production adjustments’ (from a Reuters report)

There seems to be a difficulty in reaching consensus on extending the production cuts which seemed to be admitted by the Kuwaiti Oil Minister Essam al-Marzouq.

The topic will be revisited by the end of April.

In other news:

• The Rig count has increased by a whopping 21 rigs to 652 rigs.  This is the highest level since September 2015, when crude prices were still dropping.
  

  

  Source : Baker Hughes

• Speculators cut their trading positions on WTI futures and options contracts across both NYMEX and London by 33,271 contracts to 281,804 contracts.  These are the lowest levels since December 2016.

Technical Analysis