Brent crude oil futures rose 23 cents to reach $67.26 a barrel. US crude however declined marginally to $58.82 per barrel.
Weekly data from the American Petroleum Institute will be released on Tuesday March 26. This will be followed by the official Energy Information Administration (EIA) figures the next day Wednesday.
Oil supplies drawing down
Phil Flynn an analysis Price Futures Group said: “The oil market was worried about a global recession, and now we’re kind of shaking that off. Now we’re focusing on (oil) inventories … and people aren’t going to want to be short into the inventory report, which is probably going to show another big drawdown.”
Last week, US crude inventories were forecast to have drawn down for a third straight week. In last week’s EIA report inventory had slumped by nearly 10 million barrels as exports rose to record highs.
Jim Ritterbusch of Ritterbusch and Associates said in a note: “We expect U.S. crude balances to see some additional tightening as crude exports remain sharply elevated and imports are likely downsized. But we see a reduction in the rate of global oil demand growth as becoming a larger price influencer during the next few weeks.”
Factors affecting oil prices
Last week oil prices slumped after weak factory data from the US, Europe, and Japan. This led to the inversion of the US Treasury yield curve for the first time since back in 2007. This inversions, in which long term rates fall below short term ones have been signs of an upcoming recession. Charles Evans, the Chicago Federal Reserve Bank president said that it was understandable that markets would become nervous when the yield curve flattens. However, he was still confident about the growth outlook for the US economy.
On the positive side Germany’s business climate index improved dispelling some concerns about a depression there which had been strengthened by data showing the German economy had shrunk for the third straight month. Also, supply cuts by OPEC countries and allies such as Russia had supported prices. Commerzbank noted that there were declines in US crude oil. stocks. The bank said: “Oil market-specific reports, which point to tighter supply, are preventing prices from falling any more sharply.”
Gulf of Mexico oil replacing Venezuelan heavy oil
A recent article notes: “Sour medium oil from Shell’s and BP’s Gulf of Mexico platforms is replacing Venezuela’s heavy oil for many U.S. refiners who are on the lookout for alternatives sources of crude after the U.S. sanctions on the Venezuelan oil industry, Reuters reported on Monday, citing trade sources and data. The two supermajors BP and Shell are also major operators and producers in the U.S. Gulf of Mexico, and their crude is being purchased by U.S. refiners, with the medium sour Mars grade from the Mars platform operated by Shell with partner BP a favorite. Prices of Mars have increased after the U.S. imposed sanctions on Venezuela, boosted by tighter medium-heavy supplies, the International Energy Agency (IEA) said in its Oil Market Report for March.”