Oil futures settled below $28 a barrel on Wednesday. Weighing on the general outlook for oil prices is a global demand growth slowdown.
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Light, sweet crude for March delivery gained $3.23, or 12.3%, to $29.44 a barrel Friday on the New York Mercantile Exchange, marking the largest one-day percentage gain since February 2009. We still see over 20 million barrels still waiting to discharge, over double the usual volume, as weather continues to cause delays.
Distillate stockpiles, which include diesel and heating oil, rose by 1.3 million barrels, versus expectations for a 1.6 million barrels drop, the EIA data showed.
With prices plummeting over the past two years and now hovering around $30 a barrel, a supply-side response in terms of production closures or cuts is inevitable, analysts said.
EIA and API can differ as survey responders are required to submit supply data to the government, but data are voluntarily reported to the industry group. However, “that raises the risk of a short squeeze in the very near term as there will be a lot of new, weak handed shorts in the market despite the “less bearish” underlying production numbers”.
Another driver of the recent bullishness in the crude market has been the view that low oil prices will boost growth in demand. The report highlighted that global crude oil production could average around 96.1 MMbpd (million barrels per day) in 2016. To support this view, analysts dug up the fact that crude mostly traded between $10 and $40 per barrel over the last 150 years, except for the times when either a demand or supply shock pushed the commodity higher. On the other hand, it has lowered its demand forecast for 2016, it is now likewise set to grow by 1.2 million barrels per day – previously a 1.4 million barrel per day increase had been forecast.
Global oil prices rebounded on bargain-buying in Asia yesterday after the previous day’s plunge. There seemed to be no sign the OPEC members are cutting their oil output to rebalance the market.
Still, reports this week had quite a bit of bad news. For the second quarter of 2016, inventories will jump further by 1.5 million barrels a day.
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While OPEC expects Canadian production to increase this year by 70,000 bpd to 4.46 mn bpd, led by oil sands development, it expects Mexican oil production to drop by 130,000 bpd to 2.47 mn bpd.
