Oil Price - April 18
Posted: Tue Apr 18, 2017 1:42 pm
The oil price was down slightly on Tuesday, April 18. Traders are waiting for weekly storage reports from API tonight and EIA tomorrow. IMO we are now beginning an extended period of declining U.S. crude oil in storage as refiners are really ramping up gasoline and diesel production now. Refineries utilization topped 90% last week and will probably move over 95% by the end of this month. Globally, IEA says refiners will draw more than 3 million barrels per day of black oil from storage in Q2 than they did in Q1. - Dan
OPEC aims for $60 per barrel. Top OPEC members Saudi Arabia, Iraq and Kuwait are reportedly targeting $60 per barrel, according to the WSJ. At that price level, government finances would stabilize a bit while it would still be low enough to prevent a dramatic resurgence of U.S. shale. “Iraq wants prices to rise to $60. This our aim,” said Iraq’s oil minister Jabbar al-Luaibi in an interview. A move up to $60 per barrel would also bolster the valuation of Saudi Aramco ahead of its IPO. However, the danger is that OPEC is underestimating the ability of shale to ramp up. Indeed U.S. shale output is already rebounding. Nevertheless, the desire from OPEC to reach $60 per barrel bodes well for an extension of the collective production cuts.
Citi sees mid-$60s this year. Investment banks are growing more bullish on commodities, including crude oil. Citi says it sees oil moving up into the mid-$60s later this year. Even as U.S. shale comes “roaring back,” Citi analysts see OPEC efforts as more than sufficient to tighten the oil market. “With a continuation of the OPEC and non-OPEC producer deal in the second half of 2017 and the expected associated inventory draw-down, we expect oil prices to move above $60 a barrel by the second half of the year,” Citi analysts wrote in a research note.
China’s economy better than expected, oil imports surging. China reported a 6.9 percent annual growth rate in the first quarter, much better than expected. It is also setting new oil import records by the month, dispelling fears that its economy and crude oil demand was slowing down. Imports hit a record high 9.21 million barrels per day in March, an increase of 11 percent from February. That spike is likely temporary, but China no longer appears to be the downside risk to oil prices that many analysts had feared earlier this year.
OPEC aims for $60 per barrel. Top OPEC members Saudi Arabia, Iraq and Kuwait are reportedly targeting $60 per barrel, according to the WSJ. At that price level, government finances would stabilize a bit while it would still be low enough to prevent a dramatic resurgence of U.S. shale. “Iraq wants prices to rise to $60. This our aim,” said Iraq’s oil minister Jabbar al-Luaibi in an interview. A move up to $60 per barrel would also bolster the valuation of Saudi Aramco ahead of its IPO. However, the danger is that OPEC is underestimating the ability of shale to ramp up. Indeed U.S. shale output is already rebounding. Nevertheless, the desire from OPEC to reach $60 per barrel bodes well for an extension of the collective production cuts.
Citi sees mid-$60s this year. Investment banks are growing more bullish on commodities, including crude oil. Citi says it sees oil moving up into the mid-$60s later this year. Even as U.S. shale comes “roaring back,” Citi analysts see OPEC efforts as more than sufficient to tighten the oil market. “With a continuation of the OPEC and non-OPEC producer deal in the second half of 2017 and the expected associated inventory draw-down, we expect oil prices to move above $60 a barrel by the second half of the year,” Citi analysts wrote in a research note.
China’s economy better than expected, oil imports surging. China reported a 6.9 percent annual growth rate in the first quarter, much better than expected. It is also setting new oil import records by the month, dispelling fears that its economy and crude oil demand was slowing down. Imports hit a record high 9.21 million barrels per day in March, an increase of 11 percent from February. That spike is likely temporary, but China no longer appears to be the downside risk to oil prices that many analysts had feared earlier this year.