The oil sell-off was just downright crazy. Oil got caught up in trade war fears, tech wreck fears, OPEC/Non-OPEC compliance fears, and a build in Cushing Oklahoma oil stocks as reported by Genscape. Stocks had the worst start in April since 1929, but really the magnitude of this sell-off was a big April’s Fools Day joke, just one day late.
The trade war fears are really overblown as there were no tariffs put on oil and tech wreck fears really has little to do with oil demand and just because Russia had a seasonally expected increase in oil production does not mean the OPEC /Non-OPEC deal is falling apart. Skeptics of this unholy OPEC/NON-OPEC alliance have been waiting for it to fall apart for over a year and a half, before it even started. Yet, the crowd has misread OPEC and Russia’s intentions and to suggest that the OPEC/NON-OPEC alliance is falling apart is just ridiculous.
Oil freaked out when it was reported that Russia’s oil output edged up in March to an 11-month high of 10.97 million barrels per day (bpd), slightly above a limit agreed under a global supply pact, energy ministry data showed on Monday according to Reuters. Yet, Russia had to raise production to meet weather-related demand. Reuters reported that “Russia reached the production cuts compliance (with the OPEC deal) of 93.4 percent. The fluctuations of the liquid hydrocarbons in March were due to a high demand for gas and seasonality on the domestic market,” Energy Minister Alexander Novak said in a statement. “Russia is fully committed to reaching the balance on the oil market,” he added.
Besides, OPEC and its allies are at a compliance rate of 138 percent of pledged output reductions last month. Anyone who suggests that a one month increase by Russia is a deal breaker has got to be telling you a bad April Fool’s joke. The reality should soon set in and we should be primed up for another turnaround Tuesday.
Genscape, the private forecaster, did add to the bearish mood by reporting a sizable 2,646,345-million-barrel increase in Cushing Oklahoma. Yet even with the increase that storage still has supply well below year-ago levels. Oil demand is on the rise with expansion in the U.S. and Chinese manufacturing sectors.