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By Michael Poulson, A/S Global Risk Management

Prices had fallen more than 2% overnight despite the U.S. Energy Information Administration (EIA) announcing that inventories had fallen more than expected. Market participants cite technical selling coupled with herd instincts as possible reasons why the markets fail to prop up prices despite the drawdown in inventories. The market seems keen to challenge OPEC's efforts in shifting petroleum balances while searching for the stress point for U.S. producers.

On the supply side, production is rising in Nigeria and Libya, countries exempt from the deal, offsetting cuts by other OPEC members. Nigeria's crude exports are set to surpass 2 million barrels per day (bpd) in August, highest in 17 months, as the country recovers from militant attacks that crippled production in 2016. While data showing that oil refineries in China, the world's top crude importer, are cutting operations during the peak demand summer season suggests that demand is slowing.

Release: EIA oil data (Consensus)

Crude: -2,45M barrels (-2,1M)

Distillates: 1,08M barrels (0,46M)

Gasoline: -0,58M barrels (0,44M))

Refinery utilization: 0%

With Brent trading below $45, there is speculation that OPEC could deepen production cuts ahead. OPEC members are considering further cuts to oil production but should wait until the effects of the current reductions are clearer, Iran said on Wednesday. "We are in discussions with OPEC members to prepare ourselves for a new decision," Iranian oil minister Bijan Zanganeh said after a cabinet meeting, according to the website for the Islamic Republic of Iran Broadcasting (IRIB). "But making decisions in this organisation is very difficult because any decision will mean production cuts for the members." The reason for the renewed discussion is an increase in U.S. oil production, which OPEC members had not predicted, Zanganeh added.

On the economic front, we have the US unemployment claims which should give more clues on the fate of the dollar and also the Fed's future monetary policies.

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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.