TSX May Open Higher with Rising Oil Prices

WTI Crude Oil

Oil prices increased on Wednesday as traders were digesting the mixed US stockpiles data.

The IEA also mentioned the possibility of a trade war as a threat to the cheery economic outlook where global growth and rising trade drive rising demand for oil.

Distillate stockpiles, which include diesel and heating oil, fell by 4.4 million barrels, versus expectations for a 1.5 million-barrel drop, the EIA data showed.

In a statement yesterday, Moody's said the continued Organisation of Petroleum Exporting Countries (OPEC)-led production restraints and strong global demand growth have contributed to declining global inventories, offsetting rapid increases in US' shale production.

That was the fourth consecutive rise from 870,000 bpd forecast in November.

But when U.S. and European Union sanctions hit Iran from 2011 to 2015 and the country's crude exports halved to about 1 million b/d, Saudi Arabia, Iraq, the UAE and other OPEC members, along with Russian Federation, boosted their production and claimed some of Iran's former customers. That would be a reversal from a supply deficit in 2017 and early 2018. Similar to previous years, Canada remained the largest destination for US crude oil exports, but Canada's share of total USA crude oil exports continued to decrease, down from 61% in 2016 to 29% in 2017.

But it has also encouraged a flood of shale, fuelling a debate about the effectiveness of keeping the curbs in place.

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Oil pared much of an earlier gain on Wednesday after the release of the OPEC report. Cushing crude stocks reached their lowest level in three years. We assume refining throughput will only partially meet the seasonal demand increase, with inventories filling the gap.

Brent crude oil futures were last up 2 cents at $64.66 a barrel by 2:10pm GMT, while US West Texas Intermediate futures were up 11 cents at $60.82 a barrel. The call on OPEC crude rises steadily to 32.6 mb/d in 2H18, 480 kb/d higher than current output. Iraq's oil output is now at 4.37 million barrels a day and production capacity is 4.7 million.

Still, last week's massive products draw buoyed prices on Wednesday. Increased U.S. crude oil exports were supported by increasing U.S. crude oil production and expanded infrastructure. The shockingly low level of new discoveries is the direct result of a dramatic fall in spending on exploration.

Nymex reformulated gasoline blendstock-the benchmark gasoline contract-rose 0.4% to $1.89 a gallon.

The shift has flowed through into spot prices and more importantly into spreads, which track the supply-demand balance closely. Iraq's oil output is now at 4.37 million barrels a day and production capacity is 4.7 million. Hamm has called EIA projections "just flat wrong" and warned that such high projections are distorting global oil prices. Wall Street analysts like Goldman Sachs Group and JPMorgan Chase remain convinced prices will strengthen again, but some key data suggest the problem could run deeper. China's industrial output grew 7.2 percent in the first two months of the year compared with the same period last year, beating expectations of a 6.1 percent hike.

While rivals are pumping more, OPEC's production in February fell, according to the report. Although this is a modest revision, it is interesting that provisional data suggests very strong starts to the year in China and India, which, taken together, accounted for almost 50% of global demand growth in 2017.

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