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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.

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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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