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BUNKER INDEX :: Price Index, News and Directory Information for the Marine Fuel Industry
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Oil prices drop as US stockpiles surprisingly build

17 May 2017 09:34 GMT

By A/S Global Risk Management.



By Michael Poulson, A/S Global Risk Management

Expectations of oil stockpiles were a draw as it has been most of May. But the estimated numbers from the American Petroleum Institute (API) came out with builds. So instead of a draw in the US crude oil stockpiles of 2.3 mb, as expected, the API reported an increase of about 0.9 mb.

The Energy Information Administration (EIA) expects a draw of a 2.67 mb, which is even larger than API's expectations.

Currently, there is some political turbulence in the U.S., which caused the dollar to continue its decrease - nearly reaching a six-month low. That being said, it isn't a remarkable drop the dollar made today, as it has been continuously weakening.

A weakening US dollar tends to be bullish for oil prices; as oil is nominated in US dollars. A weaker dollar makes crude oil cheaper for oil-importing countries, which could boost prices.

The most significant effect on oil prices today will likely be the actual US stockpile numbers released by the EIA later today. A lot of volatility is expected just around the release of the actual numbers.

Turning to the highly relevant OPEC cut deal situation, volatility will likely increase towards the meeting in Vienna on May 25th, as uncertainty is still fundamental.

Looking at the market after May 25th, strict compliance as seen since January 2017 will be challenged by the seasonal effects. Global oil output tends to be lower in the first half of the year than in the last, implying that the individual nations of OPEC will have to resist the temptation of increased production.



A/S Global Risk Management is a provider of customised hedging solutions for the management of price risk on fuel expenses. The company has offices in Denmark and Singapore. For further details about its risk management products and services, please call +45 88 38 00 00 or email hedging@global-riskmanagement.com.


Image: Michael Poulson, Oil Risk Manager at A/S Global Risk Management. Image credit: A/S Global Risk Management




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