Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
A surprise increase in U.S. oil supply as reported by the American Petroleum Institute as well as a report on increased shale oil production from the International Energy Agency(IEA) has the oil market acting loopy. The International Energy Agency (IEA) predicted that oil supply would outstrip demand next year, with output increases from U.S. shale producers.
The International Energy Agency (IEA) rattled the crude oil market by reporting that U.S. oil production will surge to the highest levels since 2014. The IEA said it expects U.S. crude supply to grow by 430,000 barrels a day this year, and will grow by 780,000 barrels a day in 2018, slowing down the global oil market rebalancing. Even as OPEC has record compliance to production cuts yet they report that OPEC crude oil output rose by 29,000 barrels a day in May to 32.08 million barrels a day, the highest level so far this year. This was led by Nigeria, Libya and Iraq.
The IEA also reported that globally stored oil increased by 18.6 million barrels in April in industrialized nations. Those inventories were 292 million barrels higher than the five-year average.
IEA says that, “Our first outlook for 2018 makes sobering reading for those producers looking to restrain supply,” the Paris-based energy watchdog said in its latest monthly oil market report. The IEA said the weak demand growth in the first half of fewer than 1 million barrels per day would accelerate in the second half so that demand overall for the year would average 1.3 million barrels per day, and grow further next year to 1.4 million bpd. The IEA cut its forecast for supply demand deficit in the second half of this year from 700,000 bpd to 500,000 bpd.
The API reported a big time drop in supply last week and seems to be adjusting upward their supply number, increasing it by 2.8 million barrels even as they report an 850,000 barrel drop in Cushing, Oklahoma supply. Still the increase in supply, breaking the API’s 9-week drawdown, is raising concerns as to whether the U.S. oil market is going to continue to see a drop in oil and overall supply.
The API showed a rise of 1.8 million barrels of gasoline supply, while inventories of distillates were down 1.5 million barrels.
The market, with this double whammy, is really under pressure getting to the point where if we go much lower we will see oil rigs start to come off. As oil hedges are running out, the oil drillers will have a hard time expanding if we go much lower. The IEA in the past has underestimated demand but if we don’t get better data on the supply side, it seems that the market will remain under pressure and with $44.00 dollars being a breakeven point for shale, they may find that they are a victim of their own success.
Natural gas is having a hard time as well as a cool down is expected to offset the recent heat wave. Still with U.S. exports continuing to rise and Canadian imports flat, we should see prices rebound as soon as summer returns.
Questions? Ask Phil Flynn today at 312-264-4364
A Subsidiary of Price Holdings, Inc. – an Employee Owned Diversified Financial Services Firm. Member NIBA, NFA
Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.
The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2017
Get the Power to Prosper! Tune to the Fox Business Network! Call me for my latest reports and my Daily Trade Levels at 888-264-5665 or email me at email@example.com.
SubscribeReceive daily summaries of all Market Insights blog posts.
Enter email below.
Most Recent Posts
- 2017 June 30 US Acreage Report 06/26/17
- Morning Grains. 06/26/17
- Morning Softs. 06/26/17
- Corn Higher Early… But for how long? The Corn & Ethanol Report 06/26/17
- Drying Up. The Energy Report 06/26/17
- Deliveries Notices – Cotton/Metals/Energies/Grains/Sugar/Notes
- Rains Make Grain Not Only in Spain. The Corn & Ethanol Report 06/23/17
- Downgraded! The Energy Report 06/23/17