Oil prices had its biggest up move of the year, rising 3.3% on lower supply and higher demand. I don’t mean to be so fundamental about the fundamentals, but in truth, that’s why we soared!
Oil prices surged even before the American Petroleum Report (API) reported another massive crude oil crude withdrawal. The 10.23-million-barrel draw, if confirmed by the Energy Information Administration (EIA), means that US oil supply is down almost 55 million barrels since the end of March, even as the Strategic Petroleum Resave added over 13 million of barrels of oil into the marketplace. The API brings the total inventory for crude oil in 2017 to a net draw of 7.534 million barrels, the first net draw for 2017 since January according to Oilprice. So we see that OPEC and non-OPEC cuts do matter. As I told Marketwatch, the API reported crude supply draw erases the myth that shale can offset OPEC and non-OPEC cuts barrel for barrel.
This comes as we get reports of surging oil demand in China and in the US against a back of more pledges of cutbacks and warnings for oil service companies and producers that shale output may have topped out. David Lesar, Halliburton chief executive officer and president, said in an earnings call that, “rig count growth is showing signs of plateauing and customers are tapping the brakes.” Anadarko Petroleum’s Al Walker, the company’s chief executive officer, cited, “current market conditions [that] require lower capital intensity given the volatility of margins realized in this operating environment.”
China’s economy is growing faster than even the Chinese government predicted and that is raising the forecast for Chines oil demand. Reports show that China oil demand is expected to rise by 400,000 barrels as its own domestic production plummets as those Chinese teapot refineries run hard. Zhang Haichao, vice president of Sinopec Group, told Reuters that Chinese crude oil imports are expected to exceed 400 million tons this year. China crude imports are running 13.8 percent above a year ago coming in at .8.55 million barrels of oil a day.
