Oil edged higher on Wednesday as OPEC said it was committed to eroding a global surplus of crude, but increasing shale production in the United States and still-high global stocks threatened to pull prices lower.
Rising geo-political tensions and a tightening global supply outlook is supporting crude oil. The strength comes even as the dollar is higher, being supported by risk aversion. Syria and North Korea concerns and terror attacks on innocent Coptic Christians in Egypt is raising concerns of conflict that could impact oil supply.
Crude oil is rising on peak oil concerns. OK, not the old failed ideology of “peak oil” but the fact that U.S. oil supply in the U.S. may have peaked as well as Exxon Mobil’s proven reserve. The American Petroleum Institute in its weekly report said we had the first crude oil drawdown of the year and the biggest draw in Cushing, Olka., since April of last year.
The crude oil market is wondering why the Strategic Petroleum Reserve numbers remained unchanged even as the Department of Energy announced that it had already sold over 6.0 million barrels of oil to a private concern, and they announced another sale of 10 million more barrels of oil by the end of this month. We know there is mandatory reporting of inventory shifts by the oil companies but is the SPR on the same reporting schedule.
The shortest day of the year is today as tomorrow days will get longer and hopefully less cold unless you’re long natural gas. The Energy complex ought to show interesting trade this winter with the weather and a new administration at the helm. On the Corn front the strong U.S. dollar has pressured the market and exports will key this market.
RBOB gasoline futures rose to the highest level since June, giving some support to oil that is suffering from seasonal weakness and concerns about oversupply. Price spikes along the East Coast are inevitable as cash buyers scramble to secure supply.
Crude oil prices saw a quick reaction after the Energy Information Agency showed a draw in a surprise drop in crude but fell sharply as traders mulled an increase is U.S. crude oil production as well as a colonial pipeline inspired increase in distillate stocks.