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Two largest oil price indices are set to deviate

Brent has gained momentum while the WTI prices have shown a little bit of hesitation. The difference in price movements for the two oil balances reflects a small difference in foundations between the US and the rest of the world. US shells continue to grow at a rapid pace, with output of 12.1 million barrels per day (mb / d), up nearly 600,000 bpd from October levels. The EIA has recently revised its forecast for US production to 12.4 mb / dy year, up from the previous 12.1 mb / d it had expected in 2019. Many US shale companies are showing signs of weakness, fighting for making profit and reducing spending on investor pressure. But production growth continues, much of it was increasingly led by oil spills. In the latest EIA report on drilling productivity, the Agency expects the large US shale basins to add 84,000 bpd in March. There is certainly a delay between large price movements and knock-on effects on rig numbers, drilling activity and finally production. So it may be that production grows slower as the year carries. The national bill has already been plotted A slowdown in production is entirely possible during the weeks and months ahead. But so long, the production numbers continue to surprise, weighing down the oil market. This week, the Environmental Impact Assessment reported a surprise jump in crude oil inventories of 7 million barrels. Part of it was an anomaly due to a recovery in imports after falling the previous…

Brent has gained momentum while the WTI prices have shown a little bit of hesitation.

The difference in price movements for the two oil balances reflects a small difference in foundations between the US and the rest of the world. US shells continue to grow at a rapid pace, with output of 12.1 million barrels per day (mb / d), up nearly 600,000 bpd from October levels. The EIA has recently revised its forecast for US production to 12.4 mb / dy year, up from the previous 12.1 mb / d it had expected in 2019.

Many US shale companies are showing signs of weakness, fighting for making profit and reducing spending on investor pressure. But production growth continues, much of it was increasingly led by oil spills. In the latest EIA report on drilling productivity, the Agency expects the large US shale basins to add 84,000 bpd in March.

There is certainly a delay between large price movements and knock-on effects on rig numbers, drilling activity and finally production. So it may be that production grows slower as the year carries. The national bill has already been plotted A slowdown in production is entirely possible during the weeks and months ahead.

But so long, the production numbers continue to surprise, weighing down the oil market. This week, the Environmental Impact Assessment reported a surprise jump in crude oil inventories of 7 million barrels. Part of it was an anomaly due to a recovery in imports after falling the previous week. However, production continues to climb. Related: Super tanker prices are fading when US oil plants end up constantly

At the same time, the OPEC + cuts cut to oil market conditions around the world. The group has taken more than 1

.2 mb / d offline, and Saudi Arabia goes further and aims to lower its production to 9.8 mb / d this month or 0.5 mb / d below the desired ceiling.

The market is well delivered in the United States, but stricter elsewhere. This has been translated into a price cap between Brent and WTI which has increased to $ 10 a barrel, up from a range of $ 6 to $ 8 in January. The divergence in market conditions has also been evident in some bizarre trading movements.

In February, Bloomberg reported that a series of supertankers supply US oil to Asia, but returns empty and carries nothing but seawater for stability. The shippers take a huge economic hit by, for example, not bringing oil from the Middle East back to the US, but the delivery terms for that road are frequent, while there are lots of barrels that have to go from the US to Asia. And these barrels are priced at the lower WTI reference value, so there is little arbitrage going on, with cheaper US oil items east.

“What drives this is a US oil market that looks relatively fierce with domestic production estimates that trend higher, and persistent crude oil builders we’ve seen in recent weeks,” said Warren Patterson, head of commodity strategy at ING Bank NV in Amsterdam, in Bloomberg in “At the same time, OPEC cuts support international qualities like Brent, which creates an export incentive.” Related: Cashmere conflict has Riyadh On Edge

Oplanned outages in Iran and Venezuela enlarge this trend. continues to benefit from OPEC + production cuts and involuntary supply breaks in Venezuela and Iran. An unexpectedly pronounced increase in US crude oil stocks failed to put significant pressure on the price, “Commerzbank wrote in a March 7 note.” In fact, Brent climbed over $ 66 a barrel again overnight. WTI slows somewhat behind, which increases the price gap to just shy of $ 10 a barrel again. “

The price difference between WTI in Cushing and the prices in Midland, Texas at the heart of Permian has disappeared altogether. Last year, the Permian prices traded at a $ 20 discount per barrel at its widest point due to pipeline specifications. But the discount recently fell to zero, “thanks to the addition of the Sunrise pipeline in November 2018 and the announced conversion of Seminole natural gas liquids to carry raw at the end of February 2019,” according to the Dallas Fed. [19659002] Higher volumes of US oil exports will also To smooth out the differences between WTI and Brent, more export capacity is planned for the Texas coast, but it will take time, meanwhile, prices between the two oil balances grow with an increase in US shale production at a time when OPEC + is banning the market.

By Nick Cunningham from Oilprice.com

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