Oil Video 02.12.20.
Crude Inventories Decrease By 0.7 Million Barrels
EIA has just released its Weekly Petroleum Status Report which indicated that crude inventories decreased by 0.7 million barrels. The recent API Crude Oil Stock Change report indicated that crude inventories increased by 4.1 million but the market typically relies on EIA data.
Gasoline inventories grew by 3.5 million barrels, and it looks like demand for gasoline is set to remain weak in the last month of this year. Distillate fuel inventories increased by 3.2 million barrels.
Interestingly, U.S. domestic oil production grew from 11 million barrels per day (bpd) to 11.1 million bpd. The potential growth of U.S. domestic oil production is one of the main questions for oil traders at the end of this year.
Previously, most analysts, including EIA, believed that U.S. oil production will remain close to 11 million bpd. However, oil managed to get to the $45 level and may move even higher, pushing U.S. producers to increase oil output in order to boost their revenues.
U.S. production has just made its first step away from the 11 million bpd level, but it may gain more momentum in case oil remains above the $45 level.
Norway Will Increase Its Oil Production In 2021
While OPEC+ continues negotiations about the potential extension of current oil production cuts, Norway announced that its production cuts would expire at the end of this year.
Norway is not a member of OPEC+, and its government-mandated production cuts were voluntary.
However, Norway’s decision may complicate OPEC+ negotiations as many OPEC+ members are not happy to watch how their market share is decreasing while others increase their oil production.
The market clearly needs a three-month extension of current production cuts, but even a decision to gradually increase production may also provide some support to prices.
OPEC+ must do everything to avoid a complete failure of current negotiations which may lead to a brutal sell-off. OPEC+ members will resume their negotiations tomorrow, and oil will likely be very volatile during the remaining trading sessions of this week.
For a look at all of today’s economic events, check out our economic calendar.