West Texas Intermediate and Brent crude rebounded after yesterdays bearish EIA supply data as Saudi Arabias powerful Oil Minister Ali al-Naimi discussed a recovery in oil pries amid improving demand.
WTI crude for delivery in March traded 3.05% higher at $50.33 per barrel at 8:46 GMT, having shifted in a daily range of $50.41-$49.14. The US crude benchmark slid by 2.36% to $48.84 per barrel yesterday, extending the prior sessions 5.37% decline.
Meanwhile on the ICE, Brent for settlement in April traded 2.66% higher at $57.41 a barrel, shifting in a daily range of $57.50-$56.07. The contract fell 2.73% on Wednesday to $55.92 a barrel.
The market sold off on Wednesday after data by the Energy Information Administration showed that US crude oil stockpiles rose by 4.868 million barrels in the seven days through February 6th to 417.9 million, the highest level for this time of the year in more than 80 years. Analysts had projected a jump of 3.73 million barrels. Supplies at the Cushing, Oklahoma, storage hub increased to 42.6 million barrels from 41.4 million a week earlier, the highest in a year.
Moreover, US crude production rose by 49 000 barrels per day to 9.226 million bpd, the highest for weekly statistics dating back to January 1983.
US refineries operated at 90.0% of their operable capacity, compared to 89.9% a week earlier. Gasoline production decreased to 8.7 million barrels per day, while distillate fuel output increased to 4.7 million bpd. Total motor gasoline inventories rose by 1.977 million barrels last week to 242.6 million, while distillate fuel stockpiles slid by 3.252 million barrels to 131.2 million.
However, oil pared its weekly decline on Thursday as Saudi Oil Minister Ali al-Naimi discussed a relative improvement in the market and the importance of cooperation between oil producers with Algeria’s Minister of Justice Al-Tayeb Louh, the Saudi Press Agency reported.
Al-Naimi also met with the chairman of Russian state-controlled energy giant Gazprom and held talks about the collaboration between OPEC members and producers outside the group, such as Russia.
Saudi Arabia, OPECs leading producer, steered the group into reaffirming its 30-million-bpd production quota at a November 27th meeting in Vienna, signaling determination to retain market share and curb US shale oil output.
Baker Hughes Inc. reported on Friday that US drillers idled 83 rigs last week, bringing their total number to 1 140, the lowest since December 2011. Their count has dropped by a record 435 in nine weeks.
Production growth to continue
Although the decline in active rigs has helped oil prices rebound from Januarys six-year lows, the rout may not be over yet, analysts say, as US crude output remains at the highest in more than three decades. Goldman still expects “strong production growth”, citing producers as saying that the decline in rig count has mostly come from non-contracted rigs that will be renegotiated later, leading to a rebound in activity.
Goldman Sachs joined Citigroup Inc. and Vitol Group in predicting the market may resume a drop as global oil output growth continues to outpace demand. Both the International Energy Agency and the Energy Information Administration painted this week a bearish picture for the state of the global oil market.
“As producers take an axe to their spending, supply will grow far more slowly than previously projected, but global capacity is still forecast to expand by 5.2 million barrels per day by 2020,” the IEA said in its Medium-Term Oil Market Report released on Tuesday. “Growth in US LTO (shale oil) is expected to regain momentum in the latter part of the forecast period as prices recover, and North America remains a top source of supply growth for the remainder of the decade.”
Meanwhile, the EIA kept its 2015 and 2016 domestic crude output outlook mostly unchanged from the previous month, with the agency projecting this year’s production pace to average 9.30 million bpd, the most since 1972.
Applying additional pressure, Iraq, Iran and Kuwait followed Saudi Arabia into cutting their March crude prices to Asia. Iraq’s Basrah Light crude saw its discount to Middle East benchmarks widened to $4.10, the Oil Marketing Co. said Tuesday, while National Iranian Oil Co. cut its selling price for March Light crude to a discount of $2.10 a barrel, the lowest in around 15 years.
OPEC said in a report earlier this week that producers outside the group are expected to pump around 400 000 barrels per day of crude less than previously expected, the biggest downward revision since at least 2008, as low prices force US producers to scale back output.
The oil cartel also saw higher demand than previously estimated for its own crude this year as a result of slowing non-OPEC production growth. The group will supply 29.2 million barrels per day in 2015, which however still exceeds the current output pace by around 1 million bpd and compares to its collective target of 30.0 million bpd.
Pivot points
According to Binary Tribune’s daily analysis, West Texas Intermediate March futures’ central pivot point is at $49.35. In case the contract breaches the first resistance level at $50.63, it may rise to $52.41. Should the second key resistance be broken, the US benchmark may attempt to advance $53.69.
If the contract manages to breach the first key support at $47.57, it might come to test $46.29. With this second support broken, movement to the downside could continue to $44.51.
Meanwhile, April’s central pivot point is projected at $56.41. The contract will see its first resistance level at $57.66. If breached, it may rise and test $59.40. In case the second key resistance is broken, the European crude benchmark may attempt to advance $60.65.
If Brent manages to penetrate the S1 level at $54.67, it could continue down to test $53.42. With the second support broken, downside movement may extend to $51.68 per barrel.
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