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Oil survives a difficult week – time for non-OPEC producers to respond

Published Monday, February 8th, 2016

Oil had two supports last week. Firstly talk of OPEC/non-OPEC meetings stirred by a growing number of countries expressing interest in production co-ordination. Secondly from a weakening dollar which was undermined by dovish comments from Federal Reserve officials expressing concern about the US economy and the implications for interest rate progression.

It needed these supports because it was running up against a deluge of poor economic data, mild weather and growth downgrades and a shockingly bearish US weekly oil stock report from the EIA which showed a crude build of 7.8 million bbls, a gasoline build of 5.9 million bbls and a total commercial stockbuild of 9.5 million bbls. All-time highs are being made everywhere as far as US oil stock levels are concerned. US commercial stocks have risen by an average of 740,000 bpd since the beginning of the year.

In the circumstances oil prices did well to lose only $1.93 on Brent (34.06) and $2.73 (30.89) on WTI over the course of the week and close above $30 bbl. Prices would have headed to new lows if it were not for the supports, in particular from the OPEC /non-OPEC rumours which kept shorts alert. If Saudi Arabia pours cold water on any possibility of a meeting and agreement in the coming days or a consensus emerges in the IP week corridors that an agreement is not just unlikely but impossible, then prices will rapidly head downwards again.

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Posted by David Hufton