Fueling Strategy: Please partial fill only today/tonight. Prices will fall 3 cents Wednesday – Be Safe
OPEC+ reached an agreement over the weekend to extend a global production cut of 9.7 million barrels per day by one month, through July. Saudi Arabia, Kuwait and the United Arab Emirates, however, are not intending to extend the extra cuts of 1.18 million barrels per day that they are currently making on top of the OPEC+ target, Rueters reported. The Saudis had cut an additional amount of production, “but they announced that they would no longer produce below their quota,” said James Williams, energy economist at WTRG Economics. OPEC members have not yet fully complied with their current output cut pledge. A Reuters survey pegged the member compliance rate at 74% in May. On top of that, concerns persist that other non-OPEC members will drive production higher, including North American shale-oil producers. Given the recent climb in oil prices “U.S. producers which shut in wells or cut back on production will restore most of that production,” Williams told MarketWatch.
The EIA on Tuesday raised its 2020 forecasts for West Texas Intermediate to $35.14, up nearly 17% from its May forecast. It also said Brent crude oil prices are likely to average $38.02 this year, up 11.4% from the previous view. The change in the Brent forecast is “largely due to higher than expected crude oil prices in May, driven by a combination of additional OPEC+ production cuts, declining U.S. production, and rising demand related to reductions in COVID-19 stay-at-home orders,” said Dr. Linda Capuano, EIA administrator, in a statement.
The EIA also lowered its expectations for 2020 U.S. crude-oil production by 1% to 11.56 million barrels per day. Global demand for petroleum and liquid fuels, meanwhile, will likely average 83.8 million barrels per day in the second quarter of this year, with total consumption averaging 92.5 million barrels a day in 2020, down 8.3 million barrels a day from 2019, the EIA said. Meanwhile, Reuters reported Tuesday that Libya’s Nationa Oil Coroporation declared force majeure on exports from its Sharara oilfield after an armed group shut the field’s production just days after it had reopened.
Looking ahead, the EIA will release its weekly U.S. petroleum supply data early Wednesday, after the release of the American Petroleum Institute’s figures late Tuesday.
On average, analysts polled by S&P Global Platts expect the EIA to report a decline of 3.2 million barrels for the week ended June 5. They also forecast inventory increases of 300,000 barrels for gasoline and 1.5 million barrels for distillates.