Crude Oil Dips In Asia Ahead Of OPEC, API Inventory Reports

Crude Oil Dips In Asia Ahead Of OPEC, API Inventory Reports

Refinery utilization fell from 96% to 63%. Saudi Arabia has also slightly dropped its production to more than a 10 million barrels a day, which has compensated for OPEC members such as the United Arab Emirates and Iraq that were not achieving their quotas.

The kingdom and Kazakhstan said such an extension "would be considered in due course as market fundamentals may dictate", according to a separate Saudi statement.

The near term action in oil prices will depend on how prolonged will be the impact of Hurricane Harvey on U.S. oil infrastructure.

Weekly U.S. inventories data will shed light on the impact of the hurricanes. Refinery utilization rates slumped to 79.7% of total capacity, the lowest since 2010. But as refineries gear up for a return, oil prices could find support and product prices could start to see a correction.

XAutoplay: On | OffThe five-year average is a key benchmark for OPEC, as it considers extending its production deal with non-OPEC members like Russian Federation. The IEA is predicting growth of 1.4 million barrels per day or 1.4 %, which we also think is low.

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"Global economic growth momentum has gained traction lately and has become more balanced, with all major economies now showing positive growth this year, a trend that is forecast to continue into 2018", OPEC said in its report. "Brazil and Russian Federation are both forecast to expand their recovery to 0.5 per cent and 1.5 per cent in 2017, respectively, followed by growth of 1.5 per cent and 1.4 per cent in 2018".

"We believe that Irma will have a negative impact on oil demand but not on oil production or processing", Goldman Sachs analysts said in a note. As I have written before, the IEA is notorious for underestimating demand and had to once again raise their forecast.

Overall, the IEA said that robust global demand and an output drop from the Organization of the Petroleum Exporting Countries and other producers should help balance inventories.

The IEA report confirmed the same trend highlighted in OPEC's monthly report out Tuesday. Still, that's about in line with the group's production last month, meaning OPEC won't be able to reverse its current output curbs if it wants to keep world markets balanced next year. But the EIA projects US average crude oil production to reach 9.3 MMbbl/d for 2017 and 9.8 MMbbl/d in 2018-the highest annual average in USA history. Compliance to output cuts improved from 84% in July to 89%.

Crude oil prices fell in Asia on Tuesday with industry estimates of USA inventories expected to show a leap as stocks build from Gulf Coast refinery shutdowns in the wake of Hurricane Harvey. Keeping that aside, U.S. oil inventories have declined by ~70 million barrels since the end of March.