Oil Is Losing Ground As OPEC Production Increases
Oil Video 01.10.20.
OPEC Production Increased By 160,000 Barrels Per Day In September
WTI oil declined below the $39 level and is testing the $38 level after Reuters reported that OPEC production increased by 160,000 barrels per day (bpd) in September.
The main sources of this increase were Libya and Iran. Both countries are exempt from the obligations under the production cut deal. Libya is torn by a civil war while Iran is under severe U.S. sanctions.
Recently, the sides of the Libyan civil war managed to agree to a deal that lifted the blockade from the country’s ports. Now, the market is trying to evaluate whether Libya will be able to quickly increase its oil production.
The recent inventory reports were positive for the oil market but the potential increase in Libya’s oil exports could present a problem for the market which remains worried about the second wave of coronavirus.
Traders will continue to closely monitor the progress in Libya since the country has the theoretical potential to increase its oil production from the current 250,000 bpd to 1.2 million bpd which was the norm before the blockade.
U.S. Gasoline Demand Recovery Stalls
Yesterday, EIA reported that gasoline inventories increased by 0.7 million barrels, but the market cheered the continued decrease of crude inventories which declined by 2 million barrels.
Meanwhile, EIA data indicated that U.S. gasoline demand increased from 8.515 million bpd to 8.529 million bpd. This is a step forward, but demand is still far below 9.137 million bpd which were recorded a year ago.
The main problem is that the pace of demand recovery is slowing down at levels that are significantly below normal levels, indicating that additional demand recovery may require more economic catalysts.
At this point, the U.S. domestic oil production has not managed to get back above the 11 million bpd mark after the hurricanes so crude inventories continue to fall. However, a potential increase of U.S. oil production at a time when gasoline demand recovery stalls may present a risk for oil prices.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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