Oil Video 29.05.20.
U.S. Domestic Oil Production Drops By 100,000 Barrels Per Day
Oil remains under some pressure as the EIA Weekly Petroleum Status Report showed that crude oil inventories increased by 7.9 million barrels per day (bpd).
Gasoline inventories decreased by 0.7 million bpd while distillate fuel inventories increased by 5.5 million bpd. In general, the report painted a picture of a rather weak demand for oil.
Meanwhile, the U.S. oil production declined from 11.5 million bpd to 11.4 million bpd. The pace of the domestic production decrease has slowed down but the downside trend is steady.
I’d note that the oil market did not experience any major sell-off after the inventory news because oil is trading at low levels, so bad news are already included in today’s prices.
The previous major downside move which brought the WTI May 2020 contract into the negative territory was caused by the fears of running out of oil storage. Now that such fears have been eliminated, oil will need serious downside catalysts to return back to sub-$30 levels.
Russia And Saudi Arabia Continue To Discuss The Extension Of Existing Oil Production Cuts
The potential extension of the existing oil production cuts is the main topic of this week.
According to earlier reports, Russian Energy Minister Alexander Novak discussed potential oil production cuts with Russian oil companies.
However, another report stated that Russia wanted to increase its oil production in July instead of sticking to existing production cuts.
A new Reuters report suggested that Saudi Arabia wants to keep existing oil production cuts until the end of the year.
The original OPEC+ deal called for production cuts of 9.7 million bpd in May – June, followed by production cuts of 7.7 million bpd until the end of the year.
If the existing production cuts are kept until the end of the year, the oil market will get significant support.
As usual in these discussions about production cuts, Russia’s position may be a problem.
A Reuters report stated that Russia’s leading oil company Rosneft had trouble with supplying its clients with oil due to production cuts and that it wanted to increase production after June.
The next OPEC+ meeting is scheduled for June 10 so we’ll soon learn whether Saudi Arabia and Russia reached consensus regarding production cuts.
For a look at all of today’s economic events, check out our economic calendar.