Oil Price: Waffling

The oil price comeback is in jeopardy after it appeared that Russia was waffling on extending oil production cuts past June or maybe they agreed to increase cuts with Saudi Arabia. It was a clear case of mixed signals from Russia and OPEC that eroded confidence in the recent market rally. A very bearish American Petroleum Institute (API) did not help the mood as it appears the oil demand snapback is leveling out.

Overall crude supply surged by 8.730 million barrels. It looks like one of the Saudi Tankers offloaded. Argus Media reported that eleven of the 16 very large crude carriers (VLCCs) that have arrived at the US Gulf coast with Saudi crude this month had completed their discharges. The API also showed plenty of gasoline ahead of the Memorial Day Holiday increasing by 1.12 million barrels. Yet the shocking increase came in distillate inventory that saw a whopping 6.907 million barrel increase, among one of the largest weekly in history.

Yet before the report, oil was whipsawed on stories about Russian oil output. Reports were swirling that Russia was pushing for raising output slowly once the current OPEC Plus deal ends in June. That was a surprise because it seemed as if Russia and OPEC were set to extend cuts until the end of the year. Yet the temptation to raise output by Russia and other countries is rising as prices are more attractive, and there are signs that the market may balance in a few months, much faster than most people expected.

Yet later in the day reports came out that Saudi Arabia and Russia were contemplating an even production cut. In a call between Russian President Vladimir Putin and Saudi Arabia's Crown Prince Mohammed bin Salman, they promised so-called "close coordination" on oil output cuts. Russia put out a statement that "It was agreed upon further close cooperation on this topic via the energy ministries." As I told Reuters, "It sounds great on paper, but the market is holding back excitement until we get a few more details about whether there will be cuts, how many barrels will be cut, and the length of the cuts.”

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Disclaimer: Past results are not necessarily indicative or future results.Investing in futures can involve substantial risk & is not for everyone. Trading foreign exchange also involves a ...

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