Expecting Extreme Pressure On Crude Oil In The Months Ahead

Expecting Extreme Pressure On Crude Oil In The Months Ahead

$OIL, $USO

WTI Crude Oil prices have come under concerted pressure following the release of figures from the American Petroleum Institute (API) showing a significant increase in inventory levels.

The API figures, which are typically released prior to the official EIA data, signaled a significant inventory build of 4.6-M bbl of Crude Oil. Then WTI prices dropped 0.02%, and closed the session at 45.15 bbl.

The reality is that US Crude Oil production is again on the increase as last week saw the weekly rig count increase for the 1st time in over 7 weeks.

The increase in production activity has been driven by Alaskan Oil in contrast to the reductions occurring within the shale Oil industry. It is clear that while prices remain below the Key 50.00 mark that any rallies will be self-defeating as rigs are returned to production.

The reality is that the systemic imbalances within the global Crude Oil markets have continued between OPEC and US producers. Despite statements pointing at plans to reduce supply, OPEC maintains it level of production in a strategy designed to damage the US shale Oil industry.

OPEC’s strategy coould turn out to be a failed policy as the push is on for the US to ease the current export restrictions on Crude Oil. As long as the inventory stockpile at Cushing, OK grows, so will the pressure on the government to lift the export restrictions.

Given the battle for global energy market dominance, it appears that there is a strong case of lower WTI Crude Oil prices. The incentive is in place for US shale Oil producers to innovate to reduce their operating costs. So, in the medium term, we could see a slow increase in the rig count as new efficiencies come to the oil patch.

The game changer is likely to be the lifting of export restrictions which could cause a significant increase in rig activity, in particular within the Bakken formation. Regardless of the short term outcomes, and OPEC is facing a changing marketplace.

Stay tuned…

HeffX-LTN

Paul Ebelng

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