IEA COOLS THE MARKET
BLOOMBERG - An unexpected increase in U.S. crude stockpiles further depressed the price of oil on Tuesday.
Futures slipped from the settlement in after-market trading in New York, spurred by data from the American Petroleum Institute that was said to show a 6.51 million barrel increase in U.S. crude stockpiles last week. That would be the largest build since March if Energy Information Administration data confirms it on Wednesday.
It "would put a little bit of a damper on the bullish outlook," Kyle Cooper, director of research at IAF Advisors in Houston, said by telephone. "I am assuming that crude exports remained very low for a second week in a row. After multiple weeks of near-record levels, maybe there is just a little bit of lull before those exports resume."
Prices dropped during the session as the International Energy Agency said the recent recovery in oil prices, coupled with milder-than-normal winter weather, is slowing demand growth. The worsening outlook for consumption dampened some of the enthusiasm that OPEC and its allies will extend supply curbs.
"Global demand growth, with the extension of the production cut, were the two primary factors behind the significant increase we've seen, particularly in the last six months," Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said by telephone. The dour growth forecast is "taking a little bit of the bloom off the rose."
Crude rallied above $57 a barrel in New York last week to the highest level since June 2015 as tensions in the Middle East raised concerns about the potential for supply disruptions. Prices also found support from expectations that the Organization of Petroleum Exporting Countries will extend output cuts scheduled to expire in March. That was before the IEA warned that the supply surge from U.S. shale fields will be bigger than anything the oil and natural gas industry has ever seen.
"It's pretty clear that some of the fears that were priced in over the last month will start to slowly come out," McGillian said.
By 2025, the growth in American oil production will be on par with that achieved by Saudi Arabia at the height of its expansion, according to the IEA.
"Some of the investors are getting a little bit skittish in terms of the impact on supply, particularly in North America, if we stay in this mid-$50 range," Michael Loewen, a commodities strategist at Scotiabank in Toronto, said by telephone.
West Texas Intermediate for December delivery traded at $55.14 a barrel at 4:38 p.m. after settling at $55.70 a barrel on the New York Mercantile Exchange.
Dip in Demand
Brent for January settlement dropped 95 cents to end the session at $62.21 on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $6.32 to January WTI.
The IEA reduced its demand estimate for next year by 200,000 barrels a day to 98.9 million a day, according to projections in its report. Forecasts for demand growth next year fell by 100,000 barrels a day to 1.3 million a day. "The market balance in 2018 does not look as tight as some would like, and there is not in fact a new normal" that would buoy prices above $60, said the Paris-based agency.
"If you put two and two together, it shows that we are going to be a little bit oversupplied" in the first quarter, Loewen, said. "Traders in the market are focusing on that right now. We rallied too far, too quick."
U.S. crude inventories probably slid by 2.4 million barrels last week, according to the median estimate in a Bloomberg survey. Stockpiles at Cushing, Oklahoma, the delivery point for New York-traded futures contracts, probably dropped by 50,000 barrels, according to a separate forecast compiled by Bloomberg.
The API report also is said to show gasoline stockpiles increased by 2.4 million barrels last week, while Cushing supplies dropped by 1.8 million barrels. A cushing draw of that magnitude would be the largest since July if EIA data confirms it.
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API - American Petroleum Institute reported that the first four months of this year saw U.S. petroleum demand average 750 thousand barrels a day above the same period in 2017 despite higher prices, a sign of solid economic activity. April also saw the U.S. produce a record 10.5 million barrels per day (MBD) of oil.
IMF - “Egypt’s growth has continued to accelerate during 2017/18, rising to 5.2 percent in the first half of the year from 4.2 percent in 2016/17. The current account deficit has also declined sharply, reflecting the recovery in tourism and strong growth in remittances, while improved investor confidence has continued to support portfolio inflows. In addition, gross international reserves rose to $44 billion by end-April, equal to 7 months of imports.
BAKER HUGHES A GE - U.S. Rig Count is up 1 rig from last week to 1,046, with oil rigs unchanged at 844, gas rigs up 1 to 200, and miscellaneous rigs unchanged at 2. Canada Rig Count is up 4 rigs from last week to 83, with oil rigs up 6 to 38 and gas rigs down 2 to 45.
REUTERS - Brent crude futures LCOc1 were at $79.57 per barrel at 0310 GMT, up 27 cents, or 0.3 percent from their last close. Brent broke through $80 for the first time since November 2014 on Thursday. U.S. West Texas Intermediate (WTI) crude futures were at $71.62 a barrel, up 13 cents, or 0.2 percent, from their last settlement.