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Oil Rebound as IEA sees Deficit in the first half of Year

Oil Rebound as IEA sees Deficit in the first half of Year

The market was expecting this move and the Fed said it was needed to curb increased inflationary pressures and to boost economic activity and growth. Though there is no overt collusion between these producers, since China constitutes the major market for all of these producers, they change production levels largely in response to demand conditions in that country. "There was none of that in the statement", John Canally, investment strategist and economist at LPL Financial in Boston. According to Sachdeva of Religare Securities, though sporadic pullback rallies are quite likely after the steep decline, broadly the outlook on crude oil prices is bearish what with the US Federal Reserve expected to hike interest rates and the expected strength in the dollar, which will be negative for oil prices.

The signs of physical oversupply abound from Europe to West Africa to the U.S. US demand for gasoline typically peaks between the Memorial Day holiday in late May and Labor Day in early September, when Americans traditionally take vacations.

The Toronto Stock Exchange's S&P/TSX composite index was up 99.7 points, or 0.65 per cent, to 15,479.31. Prices rose 89 cents to US$51.81 yesterday. Bloomberg points out that Goldman Sachs, Morgan Stanley, Bank of America and Citigroup are all sticking to their predictions of moderate price gains this year. Investors will also be watching OPEC's monthly report to be released on Tuesday, followed by a report from the International Energy Agency on global supply and demand on Wednesday.

The IEA said that the big backlog of unabsorbed crude oil should not come as a surprise.

"Market focus remains centred on escalating US production growth and elevated domestic inventory levels, but this is not representative of the rest of the world".

But, uncertainty remains. OPEC compliance and strategy, Russian production levels, elections in Europe, geopolitical tensions in the Middle East, nuclear actions by North Korea, lack of clarity around US trade and economic policy, and the future of global interest rates are all potential sources of volatility. This certainly doesn't bode well for energy stocks for the foreseeable future.

Indian basket of crude oil fell from around $ 55 a barrel on March 1 to $ 50 per barrel on Monday.

That compared with analysts' expectations for an increase of 3.7-million barrels.

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Secondary sources had said Saudi output fell in February to 9.797-million barrels a day, but Riyadh told Opec it rose to 10.011-million barrels a day.

"Don't expect the USA driver to save the market this year - he cares about the price now", Kevin Book, managing director of the Washington-based research firm ClearView Energy Partners, said in a telephone interview.

President Trump's ambition to make the US energy independent by reducing taxes and industry regulations will add further impetus to the plans of oil companies to ramp up activity.

US April crude futures fell 68 cents, or 1.4%, to settle at $US47.72 a barrel in NY, for a seventh straight session decline.

Provisionally, we estimate that the non-Opec countries have cut production by 37 per cent of their commitment in the first two months of the year.

Even with Wednesday's price rise, Brent and WTI both remained in technically oversold territory for a sixth day, their longest such streaks since November.

In December, the world's petro-states congratulated themselves for what they called a historic achievement-24 of them agreed to cut their collective production by 1.8 million barrels a day, all in the service of bringing order to a chaotic oil market in which prices had plunged to about $27 a barrel. The price is still $6 below January's post-deal peak of $58.37. For crude imports, volumes so far this year are close to 400,000 (kb/d) higher than a year ago; USA crude oil production has increased by 400 kb/d since September; and refinery runs fell from 17 mb/d at the start of the year to only 15.5 mb/d at the beginning of March. OPEC had agreed to cut production to boost oil price at the end of a year ago.

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