Goldman Says “Not In OPEC’s Interest” To Extend Cuts; IEA Thinks Maybe You Need To Be More “Patient”

Yesterday was a fun day for crude.

As documented here extensively, oil initially plunged on reports that Riyadh raised output to over 10m b/d in February, reversing 1/3 of the cuts made in January. 

Oil promptly plunged.

Apparently surprised at just how closely the market still listens to the kingdom, Riyadh pulled a “just kidding,” and tried to play the whole thing off. Here was the result:

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As if that wasn’t enough “crude” excitement for one day, we got the latest API numbers which showed a surprise inventory draw. To wit:

• Crude inventories fell 531k bbl last week
• Cushing +2.06m
• Gasoline -3.88m
• Distillates -4.07m

So that’s notable because i) a U.S. crude draw would be first decline since December when compared with EIA data, and ii) the median forecast for today’s EIA print is a 3.13m bbl build. Naturally, crude spiked on this news:

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Well, as we wait patiently to see if the EIA numbers confirm the API draw, Goldman wants you to know two things: 1) Tuesday’s headlines out of Saudi Arabia were really a non-event, and 2) the bank’s baseline is that contrary to reports (but consistent with Heisenberg’s own thinking) OPEC will not in fact extend the production cuts. Here’s more…

Via Goldman

“OPEC’s ‘secondary sources’ data, revised to include Wednesday’s IEA estimates, show 11 members bound by Nov. 30 output agreement pumping 29.79m b/d in Feb. vs 29.92m b/d in January,” a person familiar with matter told Bloomberg on Wednesday.

The “numbers are different from OPEC monthly report published Tuesday as not all secondary sources were included in assessment,” the person added.

Meanwhile, from the IEA:

• Oil stockpiles across developed nations climbed in January for 1st time in 6 months
• IEA predicted smaller drop in inventories during 1H than previously amid weaker assessment of demand growth
• “For those looking for a re-balancing of the oil market, the message is that they should be patient”