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US crude oil production to bottom in 3Q 2016

Published Wednesday, December 9th, 2015

Apart from the continuous evaluation of last week’s OPEC meeting there not much that had an impact on oil prices yesterday. The one news item that was significant and is discussed below failed to provide any upside impetus. It is the latest Short-term Energy Outlook from the EIA. The five main futures contracts drifted lower although the extent of the fall has moderated compared to the previous two days. WTI fell 14 cents/bbl after recovering nearly a dollar from the day’s low. After dipping below the $40/bbl mark Brent lost 47 cents/bbl, Heating Oil 204 points and RBOB 58 points.

Bears are firmly in control with all the contracts slipping to multi-year lows and the lowest prints of the 2008-2009 sell-off are now firmly in sight. These are 32.70 on WTI, 36.25 on Brent, 112.52 on Heating Oil and 351.50 on Gasoil. The 2009 low from RBOB is some way below the current price level at 78.50.

Sentiment remains overwhelmingly pessimistic as far as prices are concerned and not even this morning’s 50-60 cents/bbl strength changes this. This mini-rally has been caused by the last night’s API report on US oil inventories. It showed crude oil stocks drawing 1.9 million bbls against market expectations of a build of 252,000 bbls. If confirmed by the EIA this afternoon it would be the first fall in crude oil stocks for 11 weeks. Whilst it sounds bullish it has to be pointed out that the API saw gasoline inventories growing 2.68 million bbls (Reuters survey expects a build of 2.20 million bbls) and distillate inventories built by a hefty 5.56 million bbl (forecast is for an increase of 2.50 million bbls).

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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.