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Oil prices VOLATILE; firstly UP on positive expectations, then falling DOWN after overnight gains

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Top 5 things about Monday’s Market:

  • Macron cruises to victory in France
  • Euro SLIPS as Macron relief rally loses steam
  • Global stocks mixed; Europe trades lower after French election
  • Oil gives up strong overnight gains
  • China’s april exports, imports rise less than expected

More info on these 5 from: www.investing.com

Prices; Monday Overnight Gains

Saudi Arabia’s energy minister stated that OPEC is seriously discussing the idea to prolong output cuts. The extension of oil output cuts will happen in June. And it would also likely cover all the year long period of time. It will maybe even enter the 2018. Despite U.S. production and drilling which is constantly increasing their margins and profits, the oil sector is limited. And the U.S. drilling can’t be permanent.

Brent crude futures were at $49.48 per barrel at 0652 GMT (2.52 a.m. ET). That is up for 38 cents, or 0.75 percent, from their last close.

U.S. West Texas Intermediate futures were at $46.52 per barrel. Which is up 30 cents, or 0.7 percent from their previous price.

Energy Minister of Saudi Arabia Speaking

Today, Khalid-Al-Falih, Saudi’s energy minister explained that oil market is now rebalancing. After long years of oversupply and overstressed ambient on this market. He said they are still expecting OPEC’s decision to bring the bright trends for future oil prices.

“Based on the consultations I have had with participating members, I am rather confident the agreement will be extended into the second half of the year and possibly beyond.” (Reuters)

His speech was held during an industry event in Kuala Lumpur. In Malaysia’s capital, on Monday.

 

Exports:

The Organization of the Petroleum Exporting Countries  along with other producers, together with Russia, agreed to cut output by almost 1.8 million barrels per day (bpd) during the first half of the year. In ordet to prop up the stressed market. Saudi Arabia is de-facto leader of all the producing countries. With the biggest stake with its individual oil outputs.

 

The positive comments and upward prices came after a long last week’s plummeting trends, which pumped the negative speculations into the Oil market. The countries who are not included in this output cut deals, also contributed to low prices. Including the United States, where output is simply exalted. It has took off in recent period so strongly, that it has a huge impacts on market.

 

Bringing the decision

Next official OPEC’s meeting will be on May the 25th. And finally, decision on whether to continue the cuts will be brought out to light. Officially.

“Oil may have seen the worst of the selloff for now, as the market turns its attention to the OPEC meeting at the end of the month.” said Jeffrey Halley, senior market analyst at futures brokerage OANDA in Singapore. ( Reuters)

French Election Impact on Oil Prices

Some of the market participants say that the victory of Emmanuel Macron in the French presidential election against far-right Marine Le Pen also supported oil prices. Bringing the hopes of more stable European economy, which automatically added to positive speculations. And implemented great hopes into the markets.

Still, both Brent and WTI crude are holding below $50 for now.

U.S. drilling continued to pick up last week, with the rig count climbing by 6 to 703.

Since a low point in May 2016, U.S. producers have added 387 oil rigs, or about 123 percent, Goldman Sachs said. (Reuters)

 

Change of trends:

Finishing with info that Oil price again edged lower, erasing strong overnight gains !! U.S. crude was at $46,17 a barrel, down 5 cents, or around 0.1% . While Brent Shed 6 cents to $49.04!

Doing businesses in the markets these days (the upcoming week) would certainly be very challenging for all the race participants. Rather than last week, which was filled out with suspicions on whether the oil prices will go a bit higher & what would happen in European market.

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Base metal prices keeping a downward trend (info & data)

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Important to know of Today’s market:

  • European CB President Mario Draghi Speaks
  • Bank of Canada Governor Poloz Speaks
  • UK Services Purchasing Managers Index rose to actual 55.0 (forecast was 53.3)

For more info: https://www.investing.com/

 

LME Today:

All base metal prices on the London Metal Exchange humbled today in morning trade, May 4. After a significant sell-off on Wednesday that saw copper prices down 3.7% and nickel falling 3.3%.

Three-month copper price fell further this morning as it began trading below $5,600 per tonne. Nickel price fell additionaly $150 per tonne. All other base metals saw a slight decline.

Metal Bulletin senior analyst, William Adams, said:

“The battering the base metals suffered on Wednesday has poured cold water on last week’s attempted rebounds and has opened the way for more price weakness, especially in the case of nickel where prices have dropped to levels not seen since June last year.”  (Metal Bulletin)

Copper inventories on the LME have risen by over 60,000 tonnes over the last two days.

 

Copper below $5,600/t

On Wednesday, the LME copper price plummeted by over $200 per tonne at the close of trading. Three-month copper price is down $39.50 to $5,560.50 per tonne.
Copper inventories up 32,925 tonnes to 317,850 tonnes, with 29,275 of this in Busan. It follows a rise of 31,250 tonnes yesterday.

  • Reuters wrote that German copper products group Wieland will be acquiring the copper and steel tube business Wolverine Tube as part of its plans to expand internationally.

Workers at PT Freeport Indonesia still continuing with the one-month announced strike. They are persistent & not giving up their ideas. This is reducing the copper outputs. And will surely lead to lower supplies.
 

Other base metals fall

Three-month aluminium price fell $12.50 to $1,911 per tonne.  Stocks declined 1,175 tonnes to 1,609,925 tonnes. 

“Held well against yesterday’s sell off, trading in a $19 range (vs copper that spanned $196) with evidence of consumer buying via the spreads market. Light turnover in comparison to the copper and nickel.” (F.M.)
Nickel plunged another $150 to $9,080 per tonne. Yesterday nickel prices declined $285.  Inventories were up 30 tonnes to 380,502 tonnes.
The 3month zinc price fell $26.50 to $2,548.50 per tonne. Inventories for zinc fell 2,250 tonnes to 342,475 tonnes. Glencore’s zinc production rose 9% y-o-y, with the company adding that it currently has no plans to restart idled capacity in Australia and Peru.
Lead started trading today at $2,167.60 per tonne – a decline of $34.50 on yesterday’s close. Stocks were up 5,550 tonnes to 174,250 tonnes.
The three-month tin price decreased just $60 to $19,830 per tonne as it consolidates around the $19,800-19,900 mark.
Tin stocks on the LME fell to the lowest recorded since 1980 yesterday. Stocks declined a further 35 tonnes today and currently stand at 2,630 tonnes. (Numbers from Fast Markets)

Finishing

Metal Bulletin wrote an article on data about: Spanish unemployment, services PMI across Europe, data on UK lending, EU retail sales and a host of US data including: Challenger job cuts, initial jobless claims. Also non-farm productivity, labour costs, the trade balance. Paying attention to factory orders and natural gas storage. There’s many going on today, it will also be a challenging trade for next few days.

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Global OIL market nears balance even as stocks go up

 

 

Global OIL Demand

In the beginning, after nearly three years of surplus production, global demand for oil is finaly close to run out. Non counting the growth in the overhang of unused crude oil.

International Energy Agency said that in March, oil stocks in OPEC fell by 17.2 million barrels per day. “Over the first three months of the year, stocks were up by 38.5 million barrels, or 425,000 barrels per day (bpd), after a large increase in January.”

Yet, OECD stocks fell by 8.1 million barrels in February. To 3.055 billion barrels as demand outpaced supply to the tune of around 200,000 bpd between January and March.

Stocks are still 330 million barrels above the five-year average.

Inconsistency Reasons

 

There are several possible explantions for the inconsistency. For example, demand is overstated or the supply is understated in the estimates. On the other hand, explanation lies with “less visible” stocks, inclouding stocks held at sea. That stocks held at the sea can be either in transit or for speculative reasons. And they can also be on land, but outside the OPEC countries.

“Indeed, a look at data from various sources shows stocks drawing in some non-OECD countries over (the first quarter of 2017). Non-OECD stocks are thought to be roughly equal in size to OECD volumes, but there is far less data available about them.” As the IEA info shows.

“The net result is that global stocks might have marginally increased in the first quarter, versus an implied draw of about 0.2 million barrels per day”

We have an interesting second half to come…

 

Global Level

 

Looking at the global level, oil held offshore fell to 58.4 million barrels in March. It started from 82.6 million barrels at the end of 2016. Iranian offshore stocks also fell to 4 million barrels in March. It has started from 28 million barrels when sanctions were lifted in early 2016.

“In other words, the full extent of the production cuts has not hit yet,” Bernstein said.

The price of oil LCOc1 has increased to around $56 a barrel. It went from a 13-year low of $27 hit in January last year, which has encouraged a raft of new supply.

For the second half of 2017, the IEA expects non-OPEC supply to rise by 485,000 bpd, above its previous estimate of 400,000 bpd. The one of main reasons would be led by increases in U.S. production growth.

Indeed, although the oil market will likely tighten throughout the year, overall non-OPEC production, not just in the U.S., will soon be on the rise again.

Oil market is a volatile, very interesting market to work on. Especially when it comes to predicting possible trends based on the geopolitical activities around the world.

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