Crude oil hedge funds continue to run for the exits and are in part responsible for yesterday’s late-day swoon. Yet, despite market turmoil, the supply versus demand fundamentals for oil continue to be very bullish. Even the International Energy Agency (IEA), that hates to say anything bullish about oil, is acknowledging that despite their prior doubts that OPEC and their Non-OPEC coconspirators have succeeded in removing the global oil glut.
The crude oil glut that many said would never go away is officially gone. For the first time since June of 2015, oil supplies are back in the average range and not above average. This is happening as U.S demand is above average and that in part explains why the supply of oil continues to drain at the fastest pace in history.
Crude oil prices are showing a wee bit of green this lovely Saint Patrick’s Day and look like it is on track for its first up week since January! This comes after oil took a hit after a record amount of hedge funds went long before the trade went arseways on us. Yet the bulls may find a pot of gold at the end of the rainbow after OPEC and non-OPEC leprechauns are talking about extending production cuts past the June expiration.
The word “gradual" was all the markets had to hear. The Fed as expected, raised interest rates but signaled rate increases in the future would come at a gradual pace. That assurance was enough to cause the stock market to soar and the dollar to pull back and added momentum to oil that received some friendly data from The Energy Information Administration (EIA). That means that gradually the oil glut should start to disappear.
Crude oil prices are hanging in a tight trading range as the market tries to balance record U.S. petroleum inventories versus an outlook for a global tightening of supply as OPEC lays the groundwork for an extension of production cuts.
OPEC has delivered more than 90 % of pledged oil output curbs in January, according to figures the exporter group uses to monitor its supply, making a strong start to implementation of its first production cut in eight years.
While global markets are worried about European Union tapering and the possibility off a hard Brexit, oil seems oblivious to those threats as the U.S. oil glut is receding at a historic pace. The American Petroleum Institute (API) reported that U.S. crude oil inventories fell by 7.6 million barrels.If confirmed by the Energy Information Administration (EIA), that would be the 5th weekly drawdown in inventory in a row.