Crude Oil Price Analysis for September 14, 2017

Alicia Cross
September 15, 2017

"Based on recent bets made by investors, expectations are that markets are tightening and that prices will rise, albeit very modestly", the IEA said.

Oil prices, which have recently received some support from reports about discussions of another possible extension of the OPEC production cut deal, remained stable following the release of the EIA report, with WTI trading at US$48.75 a barrel and Brent crude at US$54.62 a barrel. Gasoline inventories fell more than anticipated-by 7.896 million barrels for the week ending September 8, against an expected draw of 4.0 million barrels.

According to the IEA, demand grew by 2.3 million barrels per day (bpd), or 2.4 percent, in the second quarter of 2017, prompting the agency to increase its growth estimate for the year to 1.6 million bpd, or 1.7 percent. And U.S. suppliers aren't just capable of seizing the opportunity for a rebound, they're chomping at the bit-low oil prices have put a significant dent in the shale boom, and there's already a backlog (or "fracklog") of drilled but not yet completed wells just waiting for the economics to change.

Inthe monthly report, OPEC reported that the oil production fell by 79,000 barrels per day (to 32.76 million barrels per day) in August.

But the EIA also reported that total domestic US crude output jumped by 572,000 barrels a day to 9.353 million barrels.

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Benchmark Brent crude was down 10 cents at $55.06 a barrel by 0730 GMT, after rising 89 cents or 1.6 per cent on Wednesday.

Though inventories in developed economies are still 195 million barrels above the five-year average, it declined by 18.7 million barrels per day in July and will soon fall to this level given robust demand outlook and falling supplies. The American Petroleum Institute had reported late Tuesday (http://www.marketwatch.com/story/api-data-show-rise-in-us-crude-supply-drop-in-gasoline-stockpiles-sources-2017-09-12) an increase of 6.2 million barrels.

"While these bullish forecasts will buoy expectations for a sustained price recovery, we should caution that global oil stockpiles are expected build in the early part of next year", said Stephen Brennock, oil analyst at PVM oil, in a note.

Global crude oil prices improved, as OPEC and non-OPEC countries continued to conform to voluntary output adjustments and United States stocks declined further, OPEC said. Texas, where Harvey made landfall, represents 31% of all US refinery capacity, based on data from January 2017.

Another issue discussed in the meeting, he added, was the possibility of extending an agreement between the OPEC (Organization of the Petroleum Exporting Countries) members to reduce oil output by June 2018.

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