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The EIA cut the call on OPEC oil

Published Thursday, September 10th, 2015

There has not been a lot to cheer about over the last 24 hours or so and it is reflected in the prices. US stock market lost value yesterday, led by energy shares as oil tumbled too. The loss of 1.45% in the Dow Jones Industrial Average and 1.39% in the S&P 500 indexes was aided by the fourth straight monthly drop of US consumer index measured by Thomson Reuters/IPSOS. We learnt overnight that Chinese producer prices registered their 42nd consecutive monthly fall, this time 5.9% from a year earlier. Additionally, the monthly fall of 3.6% in July core Japanese machinery orders did nothing to boost investors’ confidence as the Nikkei 225 Index is down 2.5% this morning with the index if Asia-Pacific shares outside Japan are down 1.4%.

It seems that risky assets are out of favour again and oil is no exception. A drop of 100,000 bpd in Saudi oil production in August could not prevent the price of WTI falling $1.79/bbl on the day and Brent $1.94/bbl. Heating Oil finished the day 552 points down and RBOB lost 424 points. The overnight weekly statistics from the API on US oil inventories added to the developing bearish sentiment as the crude oil stocks were seen building 2.1 million bbls last week against expectations of an increase of 993,000 bbls.

It appears that global oversupply is in focus again. We shall take a deeper look at the monthly EIA report on global supply/demand balance, but for now we would just like to point out that the call on OPEC oil was revised downwards for both this year and next. The agency sees demand for OPEC crude to be at 28.75 mbpd for the whole of 2015, some 70,000 bpd lower than in August whilst the same figure for 2016 is 29.75 mbpd, a downward revision of 160,000 bpd on the month.

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Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.