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Oil prices remain in tight trading range ahead of OPEC meeting

By A/S Global Risk Management.



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


Updated on 18 May 2017 08:10 GMT

By Michael Poulson, A/S Global Risk Management

Markets seem to be holding their breath ahead of the OPEC meeting next week where oil producers will discuss an extension of the current 6-month oil production cut agreement beyond June 2017. Recent news and comments suggest that the extension could be up to 9 months, i.e. into first quarter of 2018.

The weekly oil inventory report from the Energy Information Administration (EIA) showed a smaller-than-expected draw in crude oil stocks. Immediate market reaction was a spike in oil prices - likely because it was the opposite of Tuesday's API oil stocks data (build), but prices quickly fell back to around current levels of around $52, likely because markets realized that data was below consensus expectations of a larger draw - see details below. The U.S. crude oil stocks have now dropped for 6 consecutive weeks. The recent increase in shale oil production faces the risk of a bottleneck as the industry is short of oil workers - after massive layoffs when production was in a lower range. Time will tell if this will become a problem for U.S. oil producers in the longer term.

Release: EIA oil data (Consensus)

Crude: -1.75M barrels (-2.36M)

Distillates: -1.94M barrels (-1.05M)

Gasoline: -0.41M barrels (-0.73M)

Refinery utilization: 1.9%

Note that presidential elections are conducted in Iran tomorrow. The country is a large oil producer and has been ramping up oil production after lifting of international sanctions.



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.






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