Is OPEC Underestimating US Shale?

Sergiy Serdyuk  Adobe Stock

That January 2017 pact has been renewed, and the policy will continue until at least December 2018.

E-Mini futures for the S&P 500 were pointing to a steady start in NY later. There is no indication yet, however, that Saudi Arabia or its allies want to wind down the supply cut.

The stated goal of the supply cut is to reduce the excess in oil stocks to that of the five-year average, although oil ministers have said other metrics should also be considered.

Hussein Sayed, chief market strategist at FXTM, said: "While the elimination of oversupply has been a critical factor pushing oil prices, I still believe there's a significant risk premium being priced in, specifically the fear of supply disruption from the Middle East and possible renewed sanctions on Russian Federation and Iran".

Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation fell up to 7 percent intraday after crude oil prices rallied more than 3 percent on decline in U.S. crude inventories. According to analysts, OPEC (Saudi Arabia) and Russian Federation look determined to continue with the cuts at least until their official expiry date at the end of 2018, despite the fact that their official target-bring OECD oil stocks down to their five-year average-could be achieved any moment now. "The market still needs support". June Brent crude finished the session at $73.80, up $2.22 or +3.10%.

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The current oil boom appears to have staying power: Goldman Sachs recently upped its oil price forecasts, placing a three-, six- and 12-month price target on Brent crude oil, the benchmark European crude, of $75, $82.50 and $75 a barrel, respectively, from $62 previously.

WTI is traded at $69.18.

E-Mini futures for the S&P 500 rose 0.1 percent, as did futures for the FTSE.

The EIA reported US crude stockpiles dropped 1.07 million barrels last week, while supplies at the Cushing, Oklahoma, pipeline hub dropped by 1.12 million.

The EIA data also had another surprise.

Former US first lady Barbara Bush dead at 92: family
Funeral arrangements were due to be announced soon for Mrs Bush, who had suffered from chronic obstructive pulmonary disease. Bush held his wife's hand all day Tuesday and was at her side when "she left this good earth", the statement said.

In the United States, commercial crude stocks fell close to the five-year average of about 420 million barrels.

"The fact that the gasoline inventory reduction was more pronounced than anticipated was due to record-high gasoline demand, which is extremely unusual outside the summer driving season", said Commerzbank analysts in a note.

The deal, which runs through the end of this year, has almost shrunk global oil stockpiles to their five-year average.

The market is also waiting to see whether President Donald Trump will reimpose sanctions on Iran as a May 12 deadline approaches. Oil's about to have a turn.

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