Closing Commodities: Crude breaks out of its 3-session downtrend on headlines OPEC has cut over 1 mln barrels/day of oil out of the 1.2 mln barrels/day agreed to late last year; API on tap after the bell
- Crude oil broke out of its 3-session downtrend ahead of tonight's API on headlines that OPEC has surpassed 1 mln barrels/day in output reductions
- Mar crude oil futures rose $0.14 (+0.3%) to $52.76/barrel
- Color on price action in oil:
- Mar 2017 crude oil futures snapped out of a 3-session downtrend. Crude sharply reversed off of session lows after dropping as much as -0.7% initially, following headlines that OPEC has cut more than 1 mln barrels/day of the promised 1.2 mln barrels/day in planned oil production cuts (the OPEC portion).
- Crude oil supply from the 11 OPEC members with targeted production reductions avged 30.01 mln barrels/day in Jan, compared to 31.17 mln in Dec.
- Other factors to consider:
- U.S. oil production has risen by ~6.3% since July last year to almost 9 mln bpd, according to EIA data.
- Concerns these increases in US production will offset the coordinated OPEC/non-OPEC output reductions initially put pressure on crude futures in morning pit trading.
- Also initially adding pressure on oil prices was this morning's statements from Goldman regarding an estimation that y/y U.S. oil production will rise by 290k barrels/day in 2017, if a backlog on rigs that are still to become operational is accounted for.
- Note: The spread between Brent and WTI crude has been increasing, as market participants appear willing to pay a premium for Brent, as oil supply in the Middle East shrinks due to OPEC reductions, while US WTI crude oil is becoming increasingly plentiful.
- Data reminders:
- API data will be released today at 4:30 pm ET.
- EIA data will be released tomorrow at 10:30 am ET.
- Baker Hughes rig count data will be released Friday at 1 pm ET.
- Natural gas closed pit trading lower for the third day in a row ahead of Thursday's inventory data on updated warmer weather forecasts across much of the US
- Mar natural gas closed $0.11 lower (-3.4%) at $3.12/MMBtu
- EIA natural gas inventory data will be released Thursday at 10:30 am ET
- In precious metals, gold extended yesterday's gain, silver rallied on continued weakness in the dollar index
- April gold ended today's session up $15.40 (+1.3%) to $1,211.40/oz
- Gold futures have switched their front month to April from Feb, as indicated by the active amount of volume in the contracts
- Mar silver closed today's session $0.39 higher (+2.3%) at $17.54/oz
- The dollar index was -0.8% around the 99.62 level, boosted precious metals
- Commodities, as measured by the Bloomberg Commodity Index, were +0.7% around the 87.59 level