Oil mixed as United States crude stockpiles rise unexpectedly

Donald Trump

"If production increases as we now forecast, a large share of this would be eroded, leaving the global oil market with a limited "margin of safety", said Morgan Stanley's Rat.

FXTM analyst Lukman Otunuga said at the time that prices received a "solid boost" from the Trump administration's decision to cut off all imports of Iranian oil in November.

Yet despite Riyadh voicing support for Trump, Saudi Arabia may find it tough to compensate for future losses from Iran and persistent supply disruptions from Libya and Venezuela.

The world's biggest crude exporter is preparing to ramp up oil production, possibly by as much as two million barrels per day, amid USA sanctions on Iran. The objective was to reinvigorate oil prices suffering from a global economic slowdown and a deluge of US shale oil. "But there is no conviction about the next direction for prices yet".

There are a number of factors behind the recent price rise.

USA crude was bullish after official data on Thursday showed inventories at Cushing, the delivery point for US crude futures, fell to their lowest in 3-1/2 years. The contract added 20 cents on Tuesday, and there was no settlement Wednesday due to the United States holiday.

US crude oil is trading on the futures market today for about $73.52 a barrel, down about $1 from the previous session.

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How much oil is supplied or taken off the market will determine whether WTI crude oil surges to $80 per barrel, or plunges to $62 - $63 per barrel. Lately, drop in United States inventories for the straight second week and a threat from Iranian commander also helped prices to surge.

Crude stocks at the Cushing, Oklahoma, delivery hub for futures fell heavily by 2.1 million barrels, EIA said, dropping overall inventories at the key storage hub to their lowest level since 2014.

Trump tweeted Wednesday that the Organization of Petroleum Exporting Countries is "doing little to help" reduce USA gasoline costs and "if anything, they are driving prices higher". "The responsibility of paying unnecessary prices for oil by all consumers of the whole world, especially in US gas stations, is exclusively upon your (Trump's) shoulders and the price of over $100 per barrel is yet to come", Kazempour Ardebili said.

"As far as the geopolitical posturing via twitter or official statements, I think the market is taking them in stride for now", Tchilinguirian said. Suggesting that OPEC countries should produce more crude oil to increase supply and lower prices if they want to keep America's strategic partnership, he said: "This must be a two-way street".

Saudi Arabia appears to already have gotten the message. In early 2016, as a result of the easing of sanctions, oil production in the Republic greatly expanded, and exports rose to around $55bn in 2017, 70% more than in the previous year.

Oil surged in the past two weeks as the US pushes allies to end imports of Iranian crude, disruptions persist in places like Libya and American crude inventories shrink.

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