U.S. West Texas Intermediate and international benchmark Brent crude oil closed higher on Thursday, while managing to eke-out a small gain for the holiday-shortened week. Despite hitting a new five-month high earlier in the week, it was Thursday’s gains which prevented the markets from closing lower for the week. Nonetheless, this week’s price action suggests a top-heavy market. However, we do realize that the below-average pre-holiday trade may have had an effect on trading.
The news tended to lean to the bullish side on Thursday with the markets underpinned by a drop in crude shipments from top exporter Saudi Arabia and a draw in U.S. oil inventories. Gains may have been limited by a stronger U.S. Dollar which tends to limit foreign demand for U.S. oil, and weaker U.S. equities which reduced demand for higher risk assets.
Supply Side News
Saudi Arabia’s crude oil exports fell by 277,000 barrels per day just under 7 million bpd in February from the month before, according to data from the Joint Organizations Data Initiative.
On Wednesday, the EIA reported that U.S. crude inventories fell by 1.4 million barrels in the week-ending April 12. Traders were looking for a 1.6 million barrel build. Gasoline stockpiles fell 1.2 million barrels during the same time period, while distillate fuel inventories fell by 362,000 barrels.
The EIA also reported a gasoline production rate of 9.9 million barrels daily last week and a distillate fuel production rate of 4.8 million barrels daily. This compares with 10.2 million bpd of gasoline for the prior week and 5 million bpd for distillate fuel. Refinery throughput averaged 16.1 million bpd last week.
Additionally, U.S. imports dipped back towards the 6 million barrel per day mark while implied crude supply numbers remained firm.
Iran’s crude exports have dropped in April to their lowest daily level this year, suggesting a reduction in buyer interest ahead of expected further pressure from Washington.
U.S. crude oil output from seven major shale formations was expected to rise by about 80,000 bpd in May to a record 8.46 million bpd, the EIA said earlier in the week.
According to General Electric’s Baker Hughes energy services firm, U.S. energy firms this week reduced the number of oil rigs operating for the first time in three weeks as production growth forecasts from shale, the country’s largest oil fields, continue to shrink. Drillers cut eight oil rigs in the week to April 18, bringing the total count down to 825.
Big Issues Facing Traders
Traders are facing two major issues at this time: Further pressure on Iran and whether OPEC and its allies, including Russia will continue the deal to reduce production.
This article was originally posted on FX Empire
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