The Energy Information Administration failed to wow the crude oil market even after it reported the biggest crude oil drawdown of the year. The reason is a technical weakness on the charts, coupled with the promise of more Libyan oil production and the fact that U.S. oil production increase tied the highest level since November of 2015. Not even President Trump’s withdrawal from the Paris Climate Accord could give the market the lift it needed.
If you look at data from the American Petroleum Institute (API) you will see that it is obvious that OPEC/non-OPEC production cuts are starting to have an impact on U.S. oil inventory. The API not only reported a whopping 8.67-million-barrel drawdown in oil inventory last week, they also reported that during the last five weeks there has been a drop of over 19.277 million barrels.
The Summer driving season is off and running and oil is struggling to find direction. While we start to move into a period that could see substantial draws in inventory, the trade is focused on shale and what they view as near-term oversupply. Still, disappointed that Organization of the Petroleum Exporting Countries (OPEC) failed to extend production cuts or even enhance them, we are now in a waiting game to see how fast supply starts to dwindle.
Why do you build us up with oil cuts baby, just to let us down and mess us around? And then worst of all, you don’t extend production cuts when you say you will, but supply will fall still. Shale needs you to keep on drilling, we have known that from the start. So cut back more and get non-OPEC to take part?
Crude oil prices have recovered from their earlier lows but were still in the red at the time of this writing, as investors awaited the conclusion of the OPEC meeting in Vienna. According to media reports, the cartel has agreed to extend its production curbs for nine months. The decision is expected to be ratified by some non-OPEC participants, including Russia. Saudi Arabia’s energy minister, Khalid al Falih, has already dismissed suggestions that deeper cuts would be needed.