Crude Price Slips As Market Perceives Lower Demand, Improved OPEC Supply

The price of WTI fell to $102.54/B on 3 May as US economic data suggested a slowdown in economic growth and the potential for a dip in demand for fuel. US commercial inventories continue to rise and OPEC production is above its target of 30mn b/d. Speaking in Paris on 3 May, OPEC Secretary General 'Abd Allah al-Badri said the organization was averaging 32.2mn b/d. Saudi Arabia has in recent weeks boosted production in order to cover any shortfall resulting from sanctions against Iran. Mr Badri said OPEC was working to bring prices down, citing $100/B as a good price. International Energy Agency (IEA) Executive Director Maria van der Hoeven, also speaking in Paris, said the improved supply situation had removed for now the possible need to release any IEA strategic stocks.

Barclays Capital said in a petroleum report released on 3 May: “Much of the recent weakness in global oil balances has been a result of OPEC producing well above 31mn b/d, helping to offset much of the weakness in non-OPEC supply growth. However, a large part of the softness was also a result of sluggish demand due to a combination of higher prices helping peg back growth and unseasonally warm weather. Clearly, there has not been a shortage of oil since the start of the year, and this has been reflected in extremely weak price differentials in the physical market.”

In its Weekly Petroleum Status Report , released on 2 May, the US Energy Information Administration (EIA) said US commercial crude oil inventories increased by 2.8mn barrels during the week ending 27 April. At 375.9mn barrels, US crude oil inventories are at the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 2.0mn barrels and are in the middle of the average range. Distillate fuel inventories decreased by 1.9mn barrels and are in the middle of the average range for this time of year. Total commercial petroleum inventories increased by 1.9mn barrels.

US crude oil imports averaged 8.8mn b/d, up by 56,000 b/d from the previous week. Over the last four weeks, crude oil imports have averaged 8.7mn b/d, 15,000 b/d above the same four-week period last year. US crude oil refinery inputs averaged 14.7mn b/d during the week, 230,000 b/d above the previous week’s average. Total products supplied over the last four-week period have averaged nearly 18.8mn b/d, down by 1.7% compared to the similar period last year.

Settlement Prices For Benchmark Crudes ($/B)

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