Money Market Guru — Crude oil prices are not moving anywhere as a rally post Fed decision failed to hold on in US trades yesterday. WTI Oil is lingering just under $49 per barrel. MCX Crude can also see some moderation after ending up 0.40% at Rs 3190 levels yesterday. Global oil market is well supplied. The price of oil has been stuck in a narrow range since the conclusion in mid-December of the OPEC/non-OPEC production accords.

The thinking was that a floor had been put under prices, at an unspoken level of $50/bbl, so producers were probably comforted by the fact that Brent crude oil barely moved much below or above $55/bbl. Until 7 March, that is. The sudden move downwards saw prices return to almost exactly the same level as on 30 November – just below $52/bbl for Brent – when the OPEC deal was announced. The main trigger for the recent fall was mainly US-centred, caused by yet another build in crude oil stocks reported in preliminary weekly data from the Energy Information Administration (EIA). 

The stock build should not, however, be much of a surprise. Prior to the Vienna agreement production from OPEC countries was increasing relentlessly; from September to November inclusive output surged by an estimated 580 kb/d. Export volumes are still appearing in storage around the world and, as part of this, US stocks are building. The US is seeing a triple surge in supply: rising imports (exports are also growing), rising domestic production and falling refinery utilisation. For crude imports, volumes so far this year are close to 400 kb/d higher than a year ago; US crude oil production has increased by 400 kb/d since September; and refinery runs fell from 17 mb/d at the start of the year to only 15.5 mb/d at the beginning of March. It is hardly surprising; therefore, that we have a big backlog of unabsorbed crude oil, says IEA. Broadening the picture, new data for total OECD oil stocks confirms the legacy of higher production last year. — Money Market Guru — Pia