Oil prices are rising on hopes that Hurricane Jose will not do any damage to East Coast refiners that are running hot and heavy to make up for lost supply from Gulf Coast refiners that were hit hard by Hurricane Harvey. Refiners are already having success with getting gasoline prices to fall but there is more work ahead of them.
While Florida and the rest of the Gulf Coast deal with the aftermath of Hurricane Harvey and Irma and the energy markets assess the short-term demand destruction, in the bigger picture for energy, we are getting very bullish data in supply versus demand.
In the battle between the bulls and the bears, the one trend that remains constant is the trend of falling U.S. crude oil supply. Once again, the crude oil supply drop far exceeded market expectations, and according to data from the American Petroleum Institute, it fell by 9.2 million barrels last week.
There was little excitement in the oil markets during Tuesday’s trading session; with investors on guard as OPEC and Non-OPEC members discussed compliance levels on their output cut agreement, in Abu Dhabi.
Crude oil prices pulled back from the big psychological resistance of $50 per barrel as the overbought market was met with reports of rising OPEC oil production and a surprise increase in U.S. crude oil supply as reported by the American Petroleum Institute..
Oil prices surged even before the American Petroleum Report (API) reported another massive crude oil crude withdrawal. The 10.23-million-barrel draw, if confirmed by the Energy Information Administration, it means that U.S. oil supply is down almost 55 million barrels since the end of March, even as the Strategic Petroleum Resave added over 13 million of barrels of oil into the marketplace. The API brings the total inventory for crude oil in 2017 to a net draw of 7.534 million barrels, the first net draw for 2017 since January according to Oilprice. So we see that OPEC and non-OPEC cuts do matter. As I told Marketwatch, the API reported crude supply draw erases the myth that shale can offset OPEC and non-OPEC cuts barrel for barrel.
While the oil markets are attempting to maintain gains following the latest OPEC meeting, I remain unconvinced whether the outcome to the gathering actually means anything for the price of oil in the long run.