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20 April 2017, 06:04 | Kelvin Horton
Crude oil prices have moved in a narrow band between $50 per barrel and $55 per barrel for several sessions, masking some of the volatility from emerging geopolitical strains that followed a mid-April military strike on Syrian targets by the United States.
WTI crude oil staged a sharp drop down even as U.S. crude oil inventories showed a draw of 1 million barrels as expected.
Brent crude futures LCOc1 traded at $54.92 per barrel, while the US West Texas Intermediate (WTI) crude futures CLc1 also remained nearly unchanged from the last close at $52.43 a barrel, reported Reuters.
In response to a question on whether consumers can tolerate higher oil prices, he explained that the priority was for a stable oil market at the right price that serves market demand and incentivizes the continuity of production while balancing the depletion of oil reservoirs and the need to sustain investment in the upstream sector.
OPEC and other producers such as Russian Federation agreed to cut output by almost 1.8 million barrels per day in the first half of 2017 to drain a supply overhang that has persisted for nearly three years.
This week's draw in crude oil inventories is the seventh draw in the last sixteen weeks, using API data, with the API still reporting an overall hefty build over the previous 15 weeks of roughly 37.1 million barrels. However, any interpretations of an oversupplied market moving towards a balance become questionable if product stocks start rising, especially gasoline, which should now be seeing a seasonal hump in demand. However, that level was still near a record high. "The U.S. has increased production by about 600,000 barrels a day since the OPEC agreement, mitigating their cuts".
Should the deal be extended, as OPEC will consider at its May 25 ministerial meeting in Vienna, Mazrouei said he hopes those non-OPEC countries step up their commitments. Other significant contributors outside the GCC include Iraq (12 percent), Russian Federation (12 percent) and Mexico (9 percent) (Table 1). The producer bloc was largely caught off guard by the rise of U.S. shale, and its continued strength remains a bane in OPEC's efforts to draw down inventories.
Still, the EIA report, "which looks bullish for WTI, will likely be overshadowed by a continuation of the bearish correction the market has been experiencing over the past week", he said.
Official U.S. oil data is due to be published on April 19 by the Energy Information Administration (EIA). That set the stage for boosting USA inventories to a record in the first quarter of 2017, the bank said.
The potential return of the "risk premium" following USA missile strikes in Syria and outages in Libya has revived discussion of geopolitical risk and its impact on oil prices.
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