Energy Prospectus

WTI is trading over $68/bbl this morning.

Pre-market news: Kuwait hints at OPEC extension into 2019. Oil prices firmed up after Kuwait said that OPEC would consider extending the production cuts into 2019. “OPEC and its allies are expected to control their supplies at levels that meet demand even after crude inventories decline,” Jun Inoue, a senior economist at Mizuho Research Institute Ltd, told Bloomberg.

EIA weekly storage report = BULLISH

> West Texas Intermediate oil extended gains in North American trade on Wednesday, as data showed that oil supplies in the U.S. fell more than expected.

> The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 1.071 million barrels in the week ended April 13. Market analysts' had expected a crude-stock decline of 500,000 barrels, while the American Petroleum Institute late Tuesday reported a decline of 1.047 million.
> Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, decreased by 1.115 million barrels last week, the EIA said.
> Total U.S. crude oil inventories stood at 427.6 million barrels as of last week, according to a press release, which the EIA considered to be “in the lower half of the average range for this time of year”.


VERY BULLISH DECLINES IN REFINED PRODUCTS: The report also showed that gasoline inventories decreased by 2.968 million barrels, compared to expectations for a decrease of 227,000 barrels, while distillate stockpiles fell by 3.107 million barrels, compared to forecasts for a decline of 1,268,000.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for June delivery rose to $73.19 by 10:39 AM ET (14:39GMT).
The Organization of the Petroleum Exporting Countries’ and Russia is expected to meet in Saudi Arabia on Friday. The organizations efforts to curb production and end a global supply glut has been successful but the group is expected to continue to maintain the cuts.
OPEC has been cutting crude output by 1.8 million barrels per day (bpd) to prop up oil prices. The pact began in January 2017 and is set to expire at the end of 2018 but de-facto leader Saudi Arabia is pushing for the cuts to extend into 2019.

Oil prices were also support from geopolitical jitters in the Middle East.

Major oil producers may be targeting much higher oil prices. In briefings in recent weeks, senior Saudi officials have conveyed their desire to see crude prices at around $80 or even $100 a barrel, in part due the kingdom's planned IPO of Saudi Aramco, according to a report from Reuters.

"A solid drop in imports has encouraged a draw to oil inventories, while refinery runs remain strong," said Matt Smith, director of commodity research at ClipperData.

"Oil inventories have built by just three million barrels so far this year, compared to over 50 million barrels a year ago," he said. "This is driven by lower net imports, amid rocketing exports, and higher refinery runs, both offsetting the rise in oil production of around 1 million barrels per day year-on-year."

Total domestic crude production edged up by 15,000 barrels a day last week to 10.54 million barrels a day, the EIA reported.

Gasoline stockpiles declined by 3 million barrels for the week, while distillate stockpiles fell 3.1 million barrels, according to the EIA. The S&P Global Platts survey forecast supply declines of 1.9 million barrels for gasoline and 1.6 million for distillates.

"Gasoline stocks drew as implied demand was robustly higher amid the switch to summer blend" gasoline, said Smith. "Ongoing strong exports are helping draw down distillate inventories."
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"Summer Blends" of gasoline require more crude oil. - Dan