Economy

Crude oil prices dip in anticipation of inventory data release

Crude oil prices dip in anticipation of inventory data release

The 2018 federal budget, released February 27, did not have good news for the oil sector, with a forecast for lower oil prices. If you own or are planning to buy oil stocks, be very careful.

Nigeria's crude oil output, which level stood at 1.819 mbpd in January this year had been on a steady rise from the beginning of 2017 to December of the same year, when it achieved 1.828 mbpd. Because everyone seems to buying into the idea that there's growth in the global economy, and a lot of oil could be needed in the coming quarters. For 2018, the more positive global economic picture published by the International Monetary Fund is a key factor in raising our growth outlook to 1.4 mb/d.

'Prices will likely be more volatile in 2018 than 2017, driven by whipsawing sentiment around the pace of USA growth'. Heftier stockpiles and a slide in refiner demand "should end up being a bearish factor for the market as well".

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'That its oil market is dominated by a large number of uncoordinated, private-sector firms, many of whom benefit from lower production costs than producers elsewhere, means the US will remain a major player for the foreseeable future'.

He said, "The annual production of crude oil in months from January to March will be below the output caps exporting less than 7 million barrels per day".

The U.S. Energy Information Administration (EIA) expects in its latest Short-Term Energy Outlook that U.S. production will average 10.6 million bpd this year.

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Wednesday's weekly data showed a larger-than-expected increase in US crude inventories and a rise in gasoline stocks. While Canadian production has continued to rise, reflecting past investments, pipeline capacity constraints have limited producers' options for moving their products to USA markets. "$60 to 70 is the range we're seeing for this year".

Still, OPEC and its allies seem unfazed by USA shale and continue to send messages to the market that they will do "whatever it takes" to balance the oil inventories and that production cuts are here to stay until the end of 2018.

Two of the most-watched members of the Organization of Petroleum Exporting Countries sent less crude to the US - one by choice, and one not so much.

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Take the United Kingdom, for example.

USA crude inventories rose by 3 million barrels for the week ending February 23, compared with analyst expectations for a build of 2.1 million barrels.

Specifically, The IEA noted that, "In 2018, fast-rising production in non-OPEC countries, led by the U.S., is likely to grow by more than demand".

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