Oil Market Roundup - Wednesday, Week 3

by Ship & Bunker News Team
Wednesday January 16, 2019

Never mind the minuscule price rise, the market remains bearish: that was the message of several noted analysts in reaction to crude on Wednesday rising marginally, despite U.S. stockpiles growing last week for the fourth straight week and stoking concerns of a global glut, despite the highly publicized efforts of the Organization of the Petroleum Exporting Countries (OPEC) to slash output.

West Texas Intermediate ended Wednesday's session 20 cents higher at $52.31 per barrel, while Brent  rose 68 cents to $61.32 per barrel.

Traders on Wednesday were motivated by Energy Information Administration data showing that gasoline stockpiles rose 7.5 million barrels last week, compared with analysts' expectations in a Reuters poll for a 2.8 million barrel gain; diesel and heating oil also increased 3 million barrels, compared to expectations for a 1.6 million barrel rise.

As usual with the jittery trading community, this perceived negative news overshadowed the EIA's disclosure that crude inventories fell 2.7 million barrels, more than double forecasts, which compelled Carsten Fritsch, senior commodities analyst at Commerzbank, to summarize: "The continued strong rise in oil product stocks is bearish and overshadows the draw in crude oil stocks."

But as Thomas Petrie, chairman at Petrie Partners suggested to Bloomberg television on Wednesday, a bearish market is very much a matter of perspective: he said that "we've got a balance because of what Saudi Arabia and Russia have done" with regards to the output cuts; "Saudi Arabia and Russia both need oil near or above $80 per barrel, whereas theU.S. can do very well at $60-$65, and OPEC is hurting at $50-$55."

But given the schizophrenic behaviour of crude traders, a  resurgence in the crude market is a long shot, according to Scott Shellady, analyst for TJM Investments; he told Bloomberg television that "we're not going to see anything really spike on us, oil included, we just don't that environment:we're in a slower, lower for longer environment.....that's the mantra we're in right now, and with that supply hanging over our head, and with the dollar being as strong as it is, it's going to be a struggle."

As for factors that could influence crude trading in the near future, they include Britain's parliament on Tuesday overwhelmingly rejecting Prime Minister Theresa May's proposal to leave the European Union; tews that the U.S. economy is taking a bigger hit than expected from president Donald Trump's partial government shutdown (which Kevin Book, managing director of Clearview Energy Partners, feared might hinder the signing of legislation necessary to allow U.S. drillers to expand into new frontiers); and China's central bank on Wednesday making its biggest daily net cash injection via reverse repo operations on record.

With the regards to China's ongoing struggle to fortify its economy, Stephen Brennock, senior market analyst at PVM Oil, said, "This unprecedented slowdown will weigh on the global oil market and do no favors for those hoping for a sustained recovery in prices."