Are we about to see a shift in sentiment on the oil market? One might be forgiven for gaining this impression considering the (lack of) response to the news which in the past would usually have sparked rising prices. Take for example US crude oil and oil product stocks which, according to the US Department of Energy, have declined, in some cases significantly, rather than increasing. US crude oil stocks have decreased by nearly 2.2 million barrels despite a lower refinery utilization rate and higher imports, for instance. Stocks at Cushing dropped unexpectedly by just shy of 1 million barrels. And what about the escalation of the security situation in the Middle East following the latest atrocities and announcements of the IS and Iran’s attack on a tanker in the Straits of Hormuz? The fact that the market is no longer reacting euphorically to such news could indicate that the price rally – for which there is little fundamental justification – is running out of steam. Naturally there is also a fundamental explanation of the latest price weakness, e.g. the latest report from the International Energy Agency (IEA). Whereas the call on OPEC is set to decline in 2015 to 29.2 million barrels per day (and in the first half of the year to 28.4 million barrels per day), according to the IEA, OPEC stepped up its oil output in April to 31.2 million barrels per day, putting it at its highest level since September 2012. According to Commerzbnak, it does not seem very realistic that OPEC will voluntarily reduce its production level. It will be interesting to see whether the figures for the oil rig count in the US due to be published today by Baker Hughes give rise to an even gloomier mood.
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