EMEA News
Traders Ignore OPEC Rhetoric and Cause Crude Losses on Word of Stockpile Increase
The past week has seen consistent gains in crude prices despite warning signs that oil production in many parts of the world is ramping up, but the gains finally turned to losses on Wednesday, with West Texas Intermediate softening due to expectations that U.S. inventories have risen more than anticipated.
Although Brent achieved a modest 20 cent rise to $65.45 per barrel, WTI dropped an equally modest 11 cents to $61.68 as traders awaited the latest data on inventories from the American Petroleum Institute, to be released Thursday; according to a Reuters poll, stocks are expected to have risen by 1.3 million barrels in the week to February 16.
Wednesday's losses could have been more severe had not crude gained support by a gain on Wall Street, and John Kilduff, founding partner at Again Capital, noted that "Oil prices and the S&P have been highly correlated of late, with economic strength translating into improved company performance and higher energy demand."
Interestingly, traders did not respond to word from the Organization of the Petroleum Exporting Countries (OPEC) that oil stocks in developed OECD economies, which were 340 million barrels above the five-year average in January 2017, were just 74 million barrels above that level last month.
Arguably, a certain degree of skepticism may be brewing in analytical circles about the cartel's proclamations in the wake of Khalid al-Falih, energy minister for Saudi Arabia, admitting that the metrics used to calculate stockpiles is flawed - which has prompted current OPEC president Suhail al-Mazroui, who is also energy minister for the United Arab Emirates, to mention the possibility of considering other metrics in the near future.
Also unclear is what effect, if any, OPEC will have on trading in the near term if it ratifies a strategy for long-term oil cooperation with non-OPEC oil producers, including Russia - which al-Mazroui said will be discussed when they meet in June in Vienna.
Meanwhile , the UAE earned more headlines when al-Mazroui told Reuters that its production cuts under the OPEC reduction strategy will be even greater in the first quarter of this year; but this, as is the case with similar statements made by other OPEC nations and the cartel itself, is misleading because it isn't a result of willful compliance but rather due to planned field maintenance.
Earlier this week Mohammad Barkindo, secretary general for OPEC, boasted that his cartel registered 133 percent compliance with agreed output reduction targets in January - but such disclosures are losing their intended impact considering that so far in 2018, the reduced numbers have been due to civil unrest, pipeline outages, oilfield maintenance, and other facts beyond the control of OPEC members.
