Oil prices dip, as US crude inventories soar

WTI Crude Oil

WTI Crude Oil

As for the Energy Information Administration's earlier news that crude stockpiles rose by 6.2 million barrels in the week, previously jittery traders are now taking solace in the fact that 5 million barrels of that build was concentrated on the US west coast.

Sputnik: What countries would be impacted the most from this loss, obviously, apart from Iran, the producers which countries are they exporting their oil to, who's buying their oil, who's friendly towards Iran when it comes to oil purchase?

VLCC docks at Texas City, providing an opening for higher exports. Yesterday, crude oil prices fell mostly thanks to a rising dollar.

Crude exports have climbed significantly, but further gains will be more hard to achieve.

Escalating prices should also filter through into increasing exploration, production and development in the non-OPEC, non-shale sector.

Growth in United States manufacturing activity slowed by more than anticipated in the month of April, according to a report released by the Institute for Supply Management. "Production has fallen significantly as well; it used to be about 2.4 million barrels a day, and [it's] now down to 1.5 million a day and continues to decline".

USA shale production continues to increase at a rapid pace.

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WTI Crude Oil is often seen as the natural opposite, in trading terms of the U.S. Dollar.

But the US-Iran relations throws up more uncertainty into the mix. Only Russia now pumps more oil, at around 11 million bpd. Over the past 12 months, Exxon stock has traded down about 6.3%.

As refineries came back online, and crude inventories in the US drained down from extraordinary heights, WTI prices rose and converged closer to Brent. The differential between Brent and WTI has steadily widened since early March when the gap stood at roughly $3/b. The survey's prices index increased 1.2 points to 79.3, the highest reading since April 2011.

The Iran nuclear deal may be doomed, at least if you believe the global oil market. In fact, in February, the US shipped 382,000 b/d to China, second to only Canada, which purchased just 13,000 b/d higher for the month.

It's possible the United States could step up by boosting exports.

But analysts said the lack of a smoking gun took some of the heat out of oil prices. The port still needs to be expanded to handle VLCCs on a regular basis, so large-scale exports are not set to begin just yet.

But energy analysts are not certain that all of Iran's oil production growth is at risk. Corpus Christi is exploring the possibility of receiving VLCCs at its port, which would further expand the capacity to ship more Texas oil overseas. The American Petroleum Institute will release its stockpiles report this afternoon, followed tomorrow morning by figures from the Energy Information Administration. First, the aforementioned pipeline bottlenecks in the Permian could start to slow the movement of oil to the Gulf Coast. However, if that oil can not be shipped to the coast, exporting higher volumes will be hard.

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Another limiting factor for higher USA exports is that an increase in exports tightens the WTI discount.

Despite the threat of new Iransanctions, other factors prevented crude prices from rising further.

An increase in USA crude exports is viewed as a victory for policymakers in Washington, DC who have long anxious that net import dependence undermines energy security. Security of supply must be implemented into Beijing's oil import mix strategy, even if it is a tough pill to swallow for the country as it exchanges trade war barbs with Washington. However, the rest of the US economy is still vulnerable to swings in the global market.

Sputnik: President Trump tweeted his distaste at the price of the barrel of oil recently, is he right in making his statements? "So, given the constraints there, that actually sets up for a higher oil price as we go [further] into 2018", he adds.

"If that happened, Brent prices could jump to near 90 dollars (a barrel)".

Michael Poulsen: It's still uncertain what effect it would have on the U.S. economy they're already exporting whatever they can at the moment.

These dynamics also point to the advantage that USA oil exports offer for not only China but the entire Asia-Pacific region.

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