Crude oil prices are firming this morning after a surprise across-the-board draw in oil inventories reported in last night’s API inventory report. The bullish overtone from the API report is offsetting yet another overall bearish data point from the latest International Energy Agency (IEA) monthly oil projection. Yesterday, both the Energy Information Administration (EIA) and OPEC released their monthly forecasts and both were neutral to biased to the bearish side.
The oil complex remains in a discount the bearish news and is embracing any bullish news trading pattern as we have seen once again this week so far. The market has ignored most of the bearish parts of the three monthly oil forecasts including today’s IEA report and focused primarily on the small increase in global oil demand and the slowing of U.S. shale production growth.
The market remains in an upward trending trading channel with the spot WTI contract holding the lower support level over the last few sessions and is now moving higher in the trading channel. If this morning’s EIA weekly oil inventory report is in sync with last night’s API report (see below) oil prices are likely to move higher within the trading channel and work its way closer to a test of the upper channel resistance area of around $66 per barrel.
The IEA monthly oil forecast was overall bearish showing unseasonable builds in inventory while slashing the call on OPEC crude oil for 2015 by about 300,000 bpd. Global crude supply was up by a staggering 3.2 million barrels per day in April, year-on-year, extending the first quarter's massive gains. The IEA said that OPEC’s push to defend market share of the global oil market has just begun and OPEC may further increase production. Following are the main highlights of the report.
• Oil prices rallied in April and early May despite persistently high global supply and continued stock builds. Slowing U.S. LTO supplies pushed Nymex WTI prices 14% higher in April vs. March, roughly twice the increase in ICE Brent. At the time of writing, NYMEX WTI was trading at about $60.30 per barrel. ICE Brent was around $66.30 per barrel.
• Despite slowing U.S. LTO output, global oil supply growth remained at a steep 3.2 million barrels per day year-on-year in April. At 95.7 million barrels per day, total oil supplies were flat from March as higher OPEC output offset a drop in non-OPEC. Non-OPEC supply growth for 2015 is projected at 830 kb/d, up by 200 kb/d since last month's Report.
• OPEC crude supply rose by 160 kb/d to 31.21 million barrels per day in April--the highest since September 2012, and nearly 1.4 million barrels per day above a year earlier--as Iraq and Iran boosted output and top exporter Saudi Arabia held flows above 10 million barrels per day. Upward revisions to non-OPEC supply lower the call on OPEC by 0.3 million barrels per day for 2H15, to 30 million barrels per day.
• Global oil demand growth is projected at 1.1 million barrels per day for 2015, to 93.6 million barrels per day, up from 0.7 million barrels per day in 2014. The forecast is unchanged since last month as an improving economic outlook for Europe and a cold winter lift projections of OECD demand but offset reduced expectations for the FSU, the Middle East and Latin America.
• Global refinery crude runs are expected to dip seasonally to 77.8 million barrels per day in 2Q15, from 78.2 million barrels per day in 1Q15. Estimates for both 1Q15 and 2Q15 have been lifted markedly since last month's Report on robust runs in Asia and Europe. Annual gains, of 1.4 million barrels per day for both 1Q15 and 2Q15, largely shift to the non-OECD region in 2Q15.
• OECD industry oil stocks rose counter-seasonally in March by 38.4 million barrels, led by US crude. Refined products meanwhile inched lower and by end-month covered 30.3 days of forward demand, level with a month earlier. Preliminary data indicate OECD stocks continued on an upward trend, building by 35.8 million barrels in April.