Oil Rises After Weekly Stocks Report Drawdown of 1.4M

Oil rose after the Energy Information Administration (EIA) posted its weekly crude inventories report showing a 1.4-million-barrel drawdown with gasoline and distillates also showing reductions.

Supply concerns persists with US sanctions against Iran and Venezuela and the civil war in Libya, but the OPEC+ agreement has been the bigger factor. The deal to limit production has stabilized prices working against rising US production.

West Texas Intermediate graph

Energy demand was given a positive signal as China grew 6.4 percent in the first quarter of 2019.

Oil prices also got a boost from the fact that the US dollar remains on the back foot as safe haven flows have dropped the currency looking for riskier assets.

Brent crude graph

The biggest obstacle for higher prices are the same factors that got them here in the first place. US sanctions against Iran and Venezuela could get tighter, but it could trigger an end to the OPEC+ deal. Russia and other major producers have hinted that they could ramp up production.

US shale expectations point to more supply, so a repeat of 2014 could present itself if Saudi Arabia does not manage to convince major producers to keep the production cuts active.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza