Crude oil drifts lower ahead of weekly stock report

The Opec+ group of nations is in the process of, as agreed last year, cutting production in order to support the price following the +40% price collapse during last year's final quarter. While some uncertainty with regards to Russian efforts has been raised, Opec, led by Saudi Arabia, has led from the front with data from Bloomberg showing a 2.1 million barrels/day drop in production during the past two months. 

Adding to this is the political crisis in Venezuela where President Nicolas Maduro’s future remains the focus. Even the Russians have come to the conclusion that Maduro’s support is draining away following years of economic mismanagement. While US sanctions against PDVESA, the state owned oil company and life blood of Maduro’s regime, may speed up the process towards change, the short-term impact is being felt through reduced sales, especially to US refineries which are bared from sending the proceeds back to Caracas. 

Despite these oil-supportive developments the market remains stuck with the focus now turning to the ‘Weekly Petroleum Status Report’ from the US Energy Information Administration. Surveys ahead of today’s report at 15:30 GMT are in line the American Petroleum Institute with regard to crude oil and gasoline, both of which are expected to show an increase. Distillate stocks, meanwhile, are expected to show a drop in line with the seasonal behaviour. 

From a seasonal perspective, as seen below, crude oil stocks tend to rise and gasoline stocks fall as refineries cut demand and production as they head into seasonal maintenance period. There is, however, a major reason why this pattern may not be repeated, especially when looking at crude oil inventories. The continued rise in US exports and the recent cut in imports from Opec, most noticeably from Saudi Arabia, have created an additional layer of uncertainty the market has to deal with.