API reports record gasoline draw while the market awaits EIA report

WTI continues to recover grounds as the effect of Hurricane Harvey fades. However, as refineries startup is slow, it is weighing on WTI. WTI is currently trading at $48.6 per barrel and Brent at $6 per barrel premium.

Key factors at play in crude oil market –

  • The oil market is still feeling the effects of Hurricane Harvey that battered the Gulf Coast leading to refinery shut down in the tune of 4.2 million barrels per day. Many refineries started but still not fully operational.
  • Talks going on over the possible extension of the OPEC supply agreement.
  • Venezuela has called for a renegotiation of the OPEC agreement.
  • Nigeria said to resist pressure on production cuts.
  • Saudi Arabia pledged to reduce exports by a million barrels per day. Supplies to Asia are set to decline by more than half a million barrels in September. Saudi Arabia has increased price of crude for Asian and American customers.
  • US sanctioned Venezuela and barred its access to U.S. dollar.
  • OPEC not compliant to the deal for a third consecutive month.
  • OPEC production declined by 79,000 barrels per day m/m, after an increase of 173,000 barrels per day in July and after rising by 393,000 barrels per day in June compared to the previous month. In May production increased by 366,000 barrels per day.
  • UAE looking to boost production capacity to 3.5 million barrels by the end of 2018.
  • OPEC YTD compliance at 87 percent and non-OPEC compliance at 67 percent.
  • Due to Harvey, production declined to 8.78 million barrels per day.
  • The oil market is back in contango, currently at $0.49 per barrel.
  • API reported a build of 6.18 million barrels of crude oil. Gasoline inventories declined by 7.896 million barrels.

Today’s inventory report from US Energy Information Administration (EIA) will be released at 14:30 GMT.

Trade idea –

  • Short term oil outlook changed. Buy WTI targeting $56 per barrel. Brent is likely to reach $59 per barrel. Stop loss at $42 per barrel.
  • Thanks to Hurricane Harvey and Irma WTI might decline towards $44 area before moving higher.

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