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Selloff In Oil Should Be Temporary

By Phil FlynnCommoditiesFeb 14, 2018 08:57AM ET
www.investing.com/analysis/the-phil-flynn-energy-report-02142018-200290287
Selloff In Oil Should Be Temporary
By Phil Flynn   |  Feb 14, 2018 08:57AM ET
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Shoulder Season Blues

Oil prices are under pressure after the American Petroleum Institute (API) reported a 3.947-million-barrel increase in crude supply, not unexpected because it is after all shoulder season. Yet, a 2.319 million barrel drop in Cushing Oklahoma oil supply should give the bears some pause. The continued draws in the NYMEX delivery point at some point will lend support as this delivery point supply is drying up.

We also saw gasoline supply rise by 4.364 million barrels, which may have been impacted by weaker demand caused by winter weather. We should start seeing draws soon as refiners and oil companies must draw down the winter blend of gasoline. Distillate inventories also increased by 1.1 million barrels adding to the negative mood this morning.

Yet, it does look like the outside markets are looking more stable and that should lead to more market optimism. The Dollar is weaker against the Yen and that should offer crude some backdoor support.

Really with the global oil demand rising, the selloff in oil should be temporary. We know shale is on the rise, but it is just replacing lost production from other areas, like Venezuela for example.

Venezuela oil production last moth fell to its lowest level in 30 years, according to OPEC. In Its monthly published report, it reported that Venezuela produced 1.6 million barrels of oil per day last month. Production in January was down 20% from a year ago.

OPEC says that world oil demand for 2018 will grow by 1.59m bbl/day to 98.6m bbl/day, on the back of a steady rise in global economic activities and increased vehicle sales in the US, China and India. This comes as global oil inventories continue to fall. In December, OPEC global stockpiles were about 109 million barrels above the five-year average, which is OPEC's target. "In line with the existing overhang, the market is only expected to return to balance towards the end of this year.”

Selloff In Oil Should Be Temporary
 

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Selloff In Oil Should Be Temporary

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Eneasz Orzeszek
Eneasz Orzeszek Feb 14, 2018 3:05PM ET
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with Venezuela it is true but OPEC deal will not last forever...it will end and there will be no room for OPEC to increase production, especially that Russia wants to do so later this year. OPEC will lose market share and to regain it they have to decrease th price. The global economy is not doing to improve, we are on the peak of global activity so demand will not be so strong, what is more the higher the price is the smaller the demand - basic rule of economy. So I assume that for now oil will be high but later it will fall to 55$ (WTI) or even lower, around 50$
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Small Trader
Small Trader Feb 14, 2018 11:50AM ET
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Another way of saying your prediction of it going up was flawed? Always up permabull Flynn strikes again.
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Hei Leopold
Hei Leopold Feb 14, 2018 11:18AM ET
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Going into spring and summer, this is the weak season for oil. I expect oil lower until summer. Supply from Shale is just too high.
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