Crude Oil Is Weaker Due to Russia’s Crude Outlook
Early Morning Update: How Are Commodities on May 13?
Crude oil is trading lower this morning
Crude oil is trading lower on Friday morning because of the stronger dollar and Russia’s crude oil outlook. At 7:18 AM EST, the West Texas Intermediate crude futures contract for June expiry was trading at $46.19 per barrel—a fall of 1.1%. The Brent crude futures contract is trading at $47.73 per barrel—a decline of 0.71%.
Market rebalance takes longer
According to Alexander Novak, the Energy Minister of Russia, the current global oil surplus is 1.5 MMbpd (million barrels per day). The Market may not rebalance until 1H17. This is longer than the Market’s expectation of rebalancing in 2H16. In addition, he also said that Russia would produce at least 540 million tons of oil in 2016. This is equivalent to 10.81 MMpbd. This is higher than Russia’s crude oil production in 2015. It was 534 million tons in 2015. The comments from Novak kept pressure on the crude oil market on Friday morning.
Russia’s outlook on the oil market is different from the IEA (International Energy Agency). It expects the Market to rebalance as soon as 2H16. The IEA expects the supply to exceed the demand in 1H16 by 1.3 MMbpd. The IEA thinks that it will shrink to 0.2 MMbpd in 2H16. The stronger dollar also kept pressure on crude oil prices. The stronger dollar makes dollar-denominated commodities like crude oil weaker.
On Thursday, oil producers Carrizo Oil & Gas (CRZO), Canadian Natural Resources (CNQ), British Petroleum (BP), and Total S.A. (TOT) gained 2.3%, 0.94%, 0.6%, and 0.55%. The SPDR S&P Oil & Gas Exploration and Production ETF (XOP) fell 0.20%.
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