Oil glut puts speculators' US$50 billion long bet in jeopardy

The OPEC flag and the OPEC logo are seen before a news conference in Vienn

For crude imports, volumes so far this year are close to 400,000 (kb/d) higher than a year ago; U.S. crude oil production has increased by 400 kb/d since September; and refinery runs fell from 17 mb/d at the start of the year to only 15.5 mb/d at the beginning of March.

However, stocks at the Cushing terminal in Oklahoma - the key delivery hub for USA crude futures traded on the New York Mercantile Exchange - was up 2.13 million barrels from previous week's level to 66.53 million barrels. The thinking was that a floor had been put under prices, at an unspoken level of $50 per barrel, so producers were probably comforted by the fact that Brent crude oil barely moved much below or above $55 per barrel, the IEA said in an analysis posted on its website.

Both Brent and West Texas Intermediate (WTI) crude oil spot prices increased in 2016.

Led by Russian Federation, the nations reduced output by 240,000 barrels a day from October-November levels, or 43 percent of their promised 558,000-barrel reduction, according to Bloomberg calculations using preliminary data from the agency.

Prices are being supported this week by the U.S. Energy Information Administration's weekly inventories data which showed supply decreased for the first time in nine weeks, dropping 237,000 barrels from a record high.

The analysts surveyed by S&P Global Platts - the leading independent commodities and energy data provider - had expected crude stocks to go up some 3.5 million barrels.

Nymex reformulated gasoline blendstock-the benchmark gasoline contract-rose 0.4% to $1.60 a gallon.

Although global inventories rose in January, the agency said the oil market could be in deficit by 500,000 barrels per day (bpd) in the first half of 2017.

"Despite the broad-based headlines of a holistic global oil surplus, we contend that certain markets such as Asia remain in a deficit, while regions like the Atlantic Basin and the USA remain in surplus". Since then, United States crude oil production has risen ~7.5%. "We need something more substantial".

Some support came from the U.S.

Analysts say the OPEC deal may be at stake if USA producers continue to pose a threat to the oil cartel's market share.

Further, lower oil prices reduce cost of fuel and loss wastage (cost incurred for running the refinery and the fuel lost in the system) for OMCs.

The market even failed to rebound after Saudi Arabia Minister Khalid al-Falih said on Thursday the cuts by the OPEC and non-OPEC producers could be extended beyond June if oil stockpiles stayed above long-term averages. OPEC has said it wants to see inventories fall below the five-year average for industrialized nations.

Despite OPEC's unusually strong adherence with its own targets, US crude inventories are near record levels, the nation's production at a one-year peak and the number of drilling rigs has nearly doubled since May.

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