Wednesday, 15 August, 2018

OPEC Production Falls To 13-Month Low

Commodities Commodities
Kenneth Drake | 04 June, 2018, 09:00

With U.S. crude locked up onshore by infrastructure bottlenecks, a surge in supply and easing in prices may be the only thing standing between us and the next downturn.

The president's comments led the dollar.DXY to strengthen and dollar-denominated commodities to sell off, said John Kilduff, a partner at Again Capital Management.

But as far as John Kilduff, founding partner for Again Capital, is concerned, the big news story for crude and something to monitor "is this emerged disconnect between Brent and WTI: this is a three-year high in the spread differential", he said, referring to Brent's premium over WTI futures remaining near three-year highs above $10 per barrel, having surpassed $11 on Thursday (due partly to a lack of pipeline capacity in the USA keeping a lot of output within the country).

WTI's discount to Brent widened to as much as $11.57 a barrel, largest since 2015, before narrowing to $10.76 a barrel as both grades retreated.

The global benchmark, Brent crude, little changed in the previous session, was up 16 cents, at US$77.72 per barrel.

Crude production continued to set a weekly record high, edging up to 10.8 million bpd, though the weekly US figures are subject to revisions; monthly data for March will be released later on Thursday.


Hedge funds are the least bullish on rising West Texas Intermediate crude prices in nearly seven months as American output keeps breaking records, while Saudi Arabia and Russian Federation signal they're getting ready to open the taps after more than a year of restraint. The premium has doubled in less than a month, as a lack of pipeline capacity in the United States has trapped a lot of output inland.

-Moody's Investors Service just blamed high oil prices in part for a 0.2 percentage-point cut in its outlook for India's 2018 GDP growth, and warned of the potential of falling consumption spending and rising inflation across the globe if current high prices are sustained.

WTI fell 86 cents to stand at $66.18 a barrel. It rose 215,000 barrels per day to 10.47 million bpd in March, the report showed.

"Until transportation is incentivized to get crude to the coasts or production is shut in, "we're going to continue to see some weakness in WTI", Smith said". Output has risen for 14 straight weeks as drillers put more rigs to work.

According to the Weekly Petroleum Status Report, U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 3.6 million barrels during the week ending May 25.

Speculators in Brent crude cut their net long positions in the week by 49,638 contracts to 451,966. Any rise in production would be gradual, a Gulf source said.

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