Global crude surplus still alive
Crude oil prices are retracing this morning after another build in U.S. crude oil stocks reported by the API late yesterday afternoon along with news that the Kuwait oil workers’ strike is over after three days. Kuwait production is going to ramp up quickly with Reuter’s reporting that production already increased by 500,000 bpd today with expectations that Kuwaiti production will reach the average March level in a few more days.
The battle of views continues with the perception view that the market will rebalance sooner than later still in command of the short-term market direction while the reality crowd is slowly moving out of the background as each new fundamental data point continues to confirm that the global oil surplus is still alive and well and not going away anytime soon.
On April 20, the market is in a mild round of profit taking selling after a strong upside trading session yesterday. With the more widely followed EIA weekly supply and demand snapshot due out in several hours the market is taking a bit more of a defensive approach to the numbers which are expected to show another build in crude stocks (as did the API report) and an overall build in total combined crude oil and refined product inventories to another new record high level.
Now that the Doha meeting is in the history books, and OPEC is a few notches less relevant than they were after their December 2015 meeting, the market will be forced to rely on the daily, weekly and monthly global fundamental snapshots along with the assessment of the global economy going forward. In addition, the oil market will also be impacted from time to time by the externals or the direction of the U.S. dollar as well as the direction of equity values.
The ability for OPEC and select non-OPEC countries to send out 30 second news snippets over the media airwaves are now likely to fall on deaf ears (if they continue to do so). The market now knows that those are just comments as there is no impetus for any combination of OPEC/non-OPEC producers to agree to do anything other than talk. At this point in time the upcoming June OPEC meeting is likely to be a non-event unless Saudi Arabia completely changes its stance insofar as the market share strategy is concerned as the rest of OPEC is not in a position to take any production curtailment action on their own.