Market Currents: Oil wobbles on OPEC scrutiny

Global oil supplies up but OPEC abides by output cut IEA

Much of the expansion can be attributed to two things: The OPEC announcement of production cuts in November and the composition of Donald Trump's administration, which is friendlier to US production.

Over the last 10 years, stockpiles have climbed to their annual peak in January and February, when winter weather curbs driving, monthly data from the EIA show.

Oil tumbled on Tuesday after OPEC reported a rise in global crude stocks and a surprise output jump from its biggest member, Saudi Arabia, further pressuring prices that have erased almost all gains since OPEC announced output cuts in November. Iraq's compliance still hasn't come fully but more output cuts are likely in the coming weeks.

Refineries are usually willing to buy a range of crude grades but will blend them to achieve a fairly steady quality of intake in terms of density and sulfur (a well as acidity and heavy metals content).

"The OPEC cuts are real and are cleaning up the market", Citigroup analysts including Seth Kleinman wrote in a report earlier this week. The aim was to reduce a glut in global oil supply that has depressed prices, which now stand at around $48-$51 per barrel. Brazil's oil exports also have been climbing with February exports at a record 1.63 mbpd. If OPEC's agreement fails, new Brent supply should pressure Brent prices.

The real world of oil trading - where actual cargoes are bought and sold - is doing little to help the hedge funds and other speculators who placed record bets that OPEC and its allies would drive up prices. But, according to data from Petroleum Planning and Analysis Cell, domestic petroleum products consumption growth in the country has slowed down in the last three months.

Another snapshot from the oil market will arrive Friday, with oil-field services company Baker Hughes BHI, +1.34% slated to release a weekly update on the number of active USA rigs drilling for oil. This comes at a time when USA producers are eagerly taking advantage of rising prices to crank up production.

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The potential for increased US production continues to build, as Baker Hughes weekly rig count data showed an increase of 14 drilling rigs in the United States.

As prices have risen, Americans have cut back on driving, reducing consumption 1.7% so far this year from 2016, according to Energy Information Administration data Wednesday.

"Market focus remains centred on escalating US production growth and elevated domestic inventory levels, but this is not representative of the rest of the world".

A continuation of those factors can "cause oil prices to increase above $60 per barrel by year-end", said Yepez.

While Wednesday was a standout session, oil declined Thursday and on Friday, WTI was below $49 a barrel.

Broadening the picture, new data for total OECD oil stocks confirms the legacy of higher production previous year. It also reported Cushing stocks jumped 2.1 million barrels in the week to March 10. Compared with past year, total non-OPEC supply was 285,000 bpd lower, of which the United States accounts for roughly half, the agency said.

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