Oil Fundamentals Show Supply Tightening
December 18th, 2019
The inventory reports out last night from the API called crude oil stock were up 4.7 million barrels. This compares with the outlook for today’s DOE report to call crude stocks down 1.3 million barrels. Cushing crude stocks were down 357,000 barrels. Gasoline stock were up 5.6 million barrels, and this compares with the expectations for today in the DOE report for gas to be up 2.2 million barrels. Distillate stocks in the API report were up 3.7 million barrels and the outlook for today is that stocks will up 312,000 barrels.
The market is seeing some profit taking here in early trading and if the DOE inventory numbers are anything like the API the market could see more profit taking or a correction after the market being on a ten-day rally and the last four day straight up.
Lukoil’s Vice President, Leonid Fedun, said an oil price of $60-$65 per barrel would be comfortable for participants in the deal agreed to by the OPEC+ group of producers to limit output. He said price shocks would only happen if producers violate their commitments.
The energy markets have been supported by the positive sentiment with the Phase One US and China trade deal. Also helping to support prices are the oil fundamentals indicating that supplies are starting to decline. Traders are hopefully that the global oil surplus called for in Q1 of 2020 will be alleviated by the additional 500,000 bpd of OPEC+ output cuts.
The estimates for today’s propane report are for there to be a draw of 1.3 million barrels. The surprise build last week will have traders looking closely at this week’s numbers.
Recent economic data has been good and helping to support the idea that energy demand should be on the rise. Housing data had a big report and according to the Commerce Department housing starts and permits for future construction in November were up to more than a 12-year high. Housing starts were 1.365 million units, which was better than expectations for 1.345 million units. Building permits were 1.482 million units the highest level since May 2007.