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WTI Rallies Back Above $72 After Dubai Explosion, Big Crude Inventory Draw

WTI Rallies Back Above $72 After Dubai Explosion, Big Crude Inventory Draw

The combination of anxiety over a fracturing cartel as OPEC’s key members split and EIA’s forecast for a growth in global production weighed on oil prices today with WTI dropping a $71 handle intraday today.

“We expect rising production will reduce the persistent global oil inventory draws that have occurred for much of the past year and keep prices similar to current levels, averaging $72 per barrel during the second half of 2021,” the agency said.

In 2022, EIA said it expects growth in production from OPEC+ and U.S. tight oil production, along with other supply additions, will outpace growth in global oil consumption and contribute to declining oil prices.

And while all eyes are still on Saudi and UAE, tonight’s inventory data from API will likely trigger the next $1 move one way or the other…

API

  • Crude -7.983mm (-3.9mm exp)

  • Cushing +152k

  • Gasoline -2.736mm

  • Distillates +1.086mm

Crude stocks drew down for the 7th straight week, more than expected…

Source: Bloomberg

WTI hovered just below $72 ahead of the print but jumped above it when the Dubai tanker explosion news hit…

Bloomberg’s Eddie van der Walt simplifies things well, noting that traders are probably right in following a chain of logic which runs something like:

(1) OPEC+ is a cartel

(2) The function of a cartel is to drive prices higher

(3) Thus, anything that undermines its unity should lead to lower prices

Now, obviously, this is a gross simplification, and there are many disagreements that may lead to OPEC+ pumping less, not more. But that a key player was willing to walk away rather than work with its current baseline, seems like a recipe for more future supply, not less.

Tyler Durden
Wed, 07/07/2021 – 16:35

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