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Higher US oil inventories and yields lowered commodity prices

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Crude oil prices are down on Wednesday as the US inventories growth undermines OPEC’s efforts to stabilize market price levels through supply constraints.

The futures on US crude oil WTI with delivery in April depreciated by 0.81% to 56.10 USD per barrel, while the price of Brent variety fell by 0.71% to 65.39 USD per barrel.

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The markets are trying to balance OPEC’s constraints with rising US production level.

Recent data from the American Petroleum Institute show higher-than-expected crude oil reserves in the United States. The stockpiles grew by 7.3 million barrels to 451.5 million barrels in the week ending March 1. For comparison, analysts’ expectations were also upward, but by 1.2 million barrels.

The increase in crude oil reserves in the United States is affecting oil prices and, in the long-term, fears of increasing oil production in the Perm area suggest a further fall in prices.

The official data of the Energy Information Administration is expected later on Wednesday.

OPEC cut its output by 1.2 million barrels per day, in an attempt to support the markets. The cartel had to decide in April whether to continue restricting supplies, but according to insiders from the group, the decision is likely to be postponed until June. This means that production constraints will continue at least until then.

On Tuesday, the two largest US energy companies – Chevron and Exxon Mobil have published their forecasts for the Permanent Coast yields – the largest oil field in the United States, indicating that production will increase, and shale oil. If the forecast is correct, the increased yields will strengthen the pair as dominant players in both areas – Western Texas and New Mexico, which are rich in oil, and one-third of the Permanent yields are under their control over the next five years.

The bullish supply-side forecasts by two big US shale oil producers, Chevron Corp and Exxon Mobil Corp, collaborated to the downbeat tone around the black gold and undermined the efforts by the OPEC’s and its allies to cut the output levels.

Furthermore, the latest OECD global growth forecast, showing a downgrade in the 2019 global economic growth forecast from 3.5% to 3.3%, could also exacerbate the pain in the barrel of WT.

Middle East analysts see Brent price to average 60 USD per barrel in 2019

Brent crude prices will average in the 60s USD per barrel range this year, according to the majority (53%) of respondents to a GIQ industry survey conducted at the Middle East Energy Summit.

A third of the audience were more optimistic, forecasting that prices would average in the range of 70s USD. In 2018, Brent averaged 71.34 USD per barrel and would have recorded a higher level had prices not dropped dramatically by 35% during the fourth quarter on the back of unexpected waivers by the US on Iran sanctions and lower than forecast GDP numbers in China.

Prices have held in the 60s USD per barrel in the first two months of 2019, largely supported by strong compliance to the new agreement made by the OPEC+ group in December.

More than 59% of the GIQ survey audience see compliance to the deal holding at 90-100%, while almost a quarter (22%) of respondents vouched for 120% – similar to average levels achieved by the group of 25 producers under the 2017-2018 production accords.

Saudi Arabia, which is OPEC’s largest producer, reduced output by 100,000 barrels per day in February to 10.1 million barrels per day, putting its compliance rate as high as 166%. Prices have also received support from lower production by two of the OPEC members who are currently exempt from the agreement — Venezuela and Iran — constrained by geopolitical and economic factors.