Crude oil initially reacted negatively to the American Petroleum Institute report as it showed a surprising increase in U.S. oil supply. The market was expecting a draw and it hurt current thought that U.S. oil inventories had topped out. Yet, if you look at the Cushing Oklahoma delivery point we saw a larger than expected 882,000 barrel drop in supply. That sent mixed signals as did the oil product numbers.
When will the global oil market get in balance? It already has and according to the International Energy Agency, that process is accelerating. The global oil market has achieved so-called market balance but much work remains to reduce excess global oil supply.
Crude oil prices are soaring after Saudi Ariba and Russia said they have agreed to extend oil production cuts beyond the agreed upon deadline for another nine months. That means both Russia and Saudi Arabia will extend cuts to March of 2018 at a time when we are seeing evidence that the prior cuts are just starting to have an impact. It appears that the oil cuts had a lag time to get the market in balance as U.S. shale producers increased output but also as traders dumped oil from floating storage and releases of oil from the U.S. Strategic Petroleum Reserve.
Can OPEC find love and happiness and balance in a world full of shale? The OPEC report is out. OPEC is getting ready to double down on production cuts as they raise their forecast for U.S. shale oil output. This is unprecedented for the cartel to not only comply with cuts but maybe extend them as U.S. shale producers continue to increase oil output.
And they're off! Crude oil prices are trying to recover after the American Petroleum institute (API) reported a significant 5.79 million-barrel drop in U.S. crude oil supply--the biggest draw since December 2016. This comes after a reported a 4.2 million-barrel drop a week ago.