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A Drastic Shift In Oil Market Sentiment

Pipeline

Coming back from Christmas and New Year holidays, life does seem a bit better now that oil has been rallying for eight consecutive days, rising by more than 10 percent.

(Click to enlarge)

Whilst Saudi Arabia’s production of more than 0.5 mbpd last month has played a role in bolstering oil prices, it is the thawing of US-China trade talks that have really caused sentiment in markets to turn.

Brent traded above 60 USD per barrel on Wednesday afternoon, whilst WTI moved firmly into the 51-51.5 USD per barrel range.

1. US Commercial Stocks Waiting for the Jump

(Click to enlarge)

- US commercial crude stocks have, for the last five weeks, largely remained within the 441-443 MMbbl range.
- The Bloomberg survey of analysts predicted a 2.7mbpd draw for the first week of 2019.
- World-leading production levels at 11.7mbpd were counteracted by increasing refinery runs and an offset in exports amidst shrinking arbitrage opportunities for US exporters.
- The ICE Brent/WTI Nymex spread average stood at 8.6 USD per barrel for December 2018, yet has shrunk to 7.8 $/bbl in the last week of December and 8.3 $/bbl in the first week of 2019.
- Refinery runs have exceeded expectations at 17.8mbpd, with the US refinery utilization rate surging week-on-week by a whopping 2.1 percent to 97.2 percent of total capacity (USGC particularly strong with 99.4 percent).
- Crude imports averaged 7.4 mbpd in the week ending…




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