Crude oil shrugs off inventory data, pins hopes on producer cuts

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ksOn the 84th birthday of the most wonderful Keely Smith (no relation, by the way), the oil market is reversing yesterday’s losses and going ‘zooma zooma’ to the upside, despite an impending solid build to crude stocks from the weekly EIA inventory report. Here are six things to assess relating to the oil market today:

1) Contrasting stories relating to Iranian crude exports remain absolutely fascinating, especially given the added benefit of being able to see the underlying loadings in our ClipperData. (Exhibit #1:) Roknoddin Javadi from the National Iranian Oil Company is cited today as saying Iran has increased oil exports to 1.8 million barrels per day.

Meanwhile, other stories (Exhibit #2) discuss how Iran is reluctant to sweeten its terms to win back European customers. This, however, is countered by the view (Exhibit #3) that it is financial hurdles such as banking and shipping insurance that are keeping exports in check. Whatever the motives may be, a suggested increase of 500,000 bpd of exports this month is a world away right now from our viewpoint.

2) A quick tour of overnight economic data show UK industrial production coming in below consensus for January on the prior month, up a marginal 0.2% YoY. We saw a smidgen of good news from Brazil as inflation for February ticked lower, although it still remains close to 12-year highs at 10.36%. It’s another quiet day on the economic data front for the US.

3) We do get weekly inventories today, with a solid build expected for crude. This belief is endorsed by our strong import data into the US Gulf Coast, the seasonal trend of refinery maintenance, and a hat-tip from the API report last night with a 4.4 million barrel build. That said, the draw to gasoline stocks in last night’s API report appears to have more than offset the bearish crude build, and gasoline is dragging the crude complex higher today.

4) Yesterday’s monthly EIA short term energy outlook underscored the agency’s ongoing bearish posture, as it adjusted inventory builds higher into next year. It now projects that supply will continue to outpace demand by over 1 million barrels per day through the first half of next year, before moving close to being balanced in latter 2017.

The EIA pegs US production at 9.1 mn bpd in Feburary,