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Oil Jumps After API Reports Draw In Crude Oil Inventories – OilPrice.com

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Oil Jumps After API Reports Draw In Crude Oil Inventories | OilPrice.com

Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.

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The American Petroleum Institute (API) estimated on Tuesday a large crude oil inventory draw, of 4.8 million barrels for the week ending May 15.

Analysts had predicted an inventory build of 1.151 million barrels.

In the previous week, the API estimated a large build in crude oil inventories of 7.58 million barrels. Meanwhile, the EIA’s estimates were for wildly different, with the industry body reporting last week that the inventories had fallen by 700,000 barrels.

WTI was trading up on Tuesday afternoon prior to the API’s data release, but the day had already seen swings from a gain for the day to a loss, then back to a gain as the demand picture looks a bit rosier than has in past weeks on the last day of the June futures contract—a day that last month was plagued with uncertainty and negative oil prices.

Oil production in the United States has now fallen from 13.1 million bpd on March 13 to 11.6 million bpd for May 8, according to the Energy Information Administration—a drop of 1.5 million bpd.

At 4:00 pm EDT on Tuesday the WTI benchmark was trading up on the day by $0.54 (+1.70%) at $32.36—nearly $7 per barrel up from this time last week. The price of a Brent barrel was trading down on Tuesday, by $0.10 -(0.29%), at $34.71 as traders took their profits. The Brent barrel is down roughly $5 per barrel week on week, with the spread between WTI and Brent closing.

The API reported a draw of 651,000 barrels of gasoline for week ending May 15—compared to last week’s 1.911-million-barrel draw. This week’s draw compares to analyst expectations for a 2.134-million-barrel draw for the week.

Distillate inventories were up by 5.1 million barrels for the week, compared to last week’s 4.712-barrel build, while Cushing inventories saw a draw of 5 million barrels.

At 4:42 pm EDT, WTI was trading at $32.36 while Brent was trading at $34.51.

By Julianne Geiger for Oilprice.com

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Saudi Arabia And Russia Agree To Extend Production Cuts – OilPrice.com

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Saudi Arabia And Russia Agree To Extend Production Cuts | OilPrice.com

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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    Saudi Arabia and Russia have reached a preliminary agreement to extend the current level of the OPEC+ production cuts by one month, provided that the laggards in compliance ensure over-compliance going forward to compensate for flouting their quotas so far, OPEC sources told Reuters on Wednesday.  

    “Any agreement on extending the cuts is conditional on countries who have not fully complied in May deepening their cuts in upcoming months to offset their overproduction,” an OPEC source told Reuters.

    According to the original agreement reached in April, OPEC+ was to cut 9.7 million bpd in combined production for two months—May and June—and then ease these to 7.7 million bpd, to stay in effect until the end of the year. Then, from January 2021, the production cuts would be further eased to 5.8 million bpd, to remain in effect until end-April 2022.

    Despite weak compliance from OPEC in May, as per a Reuters survey, the market expects that the OPEC+ coalition is motivated enough to extend the 9.7-million-bpd cuts through July or August. 

    On Monday, reports emerged that the OPEC+ group could hold its June meeting this week, earlier than the initial plans to hold the teleconference on June 9 and 10.  Related: Petrobras Oil Stockpiles Are “Paradoxically” Low

    However, an earlier meeting is being held up by the fact that the leaders of the pact, Saudi Arabia and Russia, will be seeking assurances from all non-compliant members that they will over-comply going forward to compensate for the loose compliance in May, an OPEC delegate told Argus today. According to the delegate, there will be “no free ride” for non-compliant members in the OPEC+ deal. These producers likely include Iraq and Nigeria from OPEC and Kazakhstan from non-OPEC.

    OPEC’s second-largest producer and the biggest laggard in the output cuts, Iraq, said on Tuesday that it would further reduce production and that it remains committed to the OPEC+ pact.

    Oil prices retreated following the reports of a one-month extension, after earlier on Wednesday prices had hit nearly three-month highs, with Brent Crude breaking above $40 a barrel.   

    By Tsvetana Paraskova for Oilprice.com

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      Bank of Canada keeps key interest rate target on hold – CTV News

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      OTTAWA —
      The Bank of Canada kept its key interest rate target on hold as it said it believes the economy has avoided its worst-case scenario due to the pandemic.

      The central bank said Wednesday its target for the overnight rate will remain at 0.25 per cent.

      It said the impact of the pandemic on the global economy appears to have peaked, although uncertainty about how the recovery will unfold remains high.

      The bank said it believes Canada has avoided the most severe economic scenario painted that it painted in April, updating its GDP figures for the second quarter of the year.

      The central bank now expects GDP to decline between 10 and 20 per cent compared with the fourth quarter of 2019, down from the 15 to 30 per cent decline forecasted in April.

      In a statement announcing the rate decision, the central bank said it still expects the economy to resume growth in the third quarter.

      “Decisive and targeted fiscal actions, combined with lower interest rates, are buffering the impact of the shutdown on disposable income and helping to lay the foundation for economic recovery,” the statement said.

      The announcement comes on the first day of Tiff Macklem’s tenure as governor, taking over from Stephen Poloz whose seven-year term ended Tuesday.

      Macklem participated as an observer during deliberations by the bank’s governing council over the past few days, the statement says, adding that the new governor “endorses the rate decision and measures announced.”

      The bank also announced it was reducing the frequency of its term repo operations and purchases of bankers’ acceptances citing improvements in short-term funding conditions.

      Other programs to purchase federal, provincial, and corporate debt will continue unchanged, the bank says, but adds it could change tactics in response to economic conditions.

      “As market function improves and containment restrictions ease, the Bank’s focus will shift to supporting the resumption of growth in output and employment,” the statement says. “The Bank maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway.”

      Economic reports continue this week with Statistics Canada’s look at the May jobs market scheduled for release Friday.

      This report by The Canadian Press was first published June 3, 2020

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      Bank of Canada maintains target for the overnight rate, scales back some market operations as financial conditions improve – Bank of Canada

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      The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent.

      Incoming data confirm the severe impact of the COVID-19 pandemic on the global economy. This impact appears to have peaked, although uncertainty about how the recovery will unfold remains high. Massive policy responses in advanced economies have helped to replace lost income and cushion the effect of economic shutdowns. Financial conditions have improved, and commodity prices have risen in recent weeks after falling sharply earlier this year. Because different countries’ containment measures will be lifted at different times, the global recovery likely will be protracted and uneven.  

      In Canada, the pandemic has led to historic losses in output and jobs. Still, the Canadian economy appears to have avoided the most severe scenario presented in the Bank’s April Monetary Policy Report (MPR). The level of real GDP in the first quarter was 2.1 percent lower than in the fourth quarter of 2019. This GDP reading is in the middle of the Bank’s April monitoring range and reflects the combined impact of falling oil prices and widespread shutdowns. The level of real GDP in the second quarter will likely show a further decline of 10-20 percent, as continued shutdowns and sharply lower investment in the energy sector take a further toll on output. Decisive and targeted fiscal actions, combined with lower interest rates, are buffering the impact of the shutdown on disposable income and helping to lay the foundation for economic recovery. While the outlook for the second half of 2020 and beyond remains heavily clouded, the Bank expects the economy to resume growth in the third quarter.

      CPI inflation has decreased to near zero, as anticipated in the April MPR, mainly due to lower prices for gasoline. The Bank expects temporary factors to keep CPI inflation below the target band in the near term. The Bank’s core measures of inflation have drifted down, although by much less than the CPI, and are now between 1.6 and 2 percent.

      The Bank’s programs to improve market function are having their intended effect. After significant strains in March, short-term funding conditions have improved. Therefore, the Bank is reducing the frequency of its term repo operations to once per week, and its program to purchase bankers’ acceptances to bi-weekly operations. The Bank stands ready to adjust these programs if market conditions warrant. Meanwhile, its other programs to purchase federal, provincial, and corporate debt are continuing at their present frequency and scope.

      As market function improves and containment restrictions ease, the Bank’s focus will shift to supporting the resumption of growth in output and employment. The Bank maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway. Any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target.

      Information notes

      Tiff Macklem assumes his role as the Bank’s tenth Governor today. He participated as an observer in Governing Council’s deliberations for this policy interest rate decision and endorses the rate decision and measures announced in this press release.

      The next scheduled date for announcing the overnight rate target is July 15, 2020. The next full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR at the same time.

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