Everyone thought this week’s big stories would be China or the Federal Reserve. But it might be all the good news in energy.
Crude oil futures (@CL) are headed for their biggest gain in over a month after a government report showed inventories shrinking by 8.6 million barrels. That not only stunned analysts expecting an increase of 3.5 million barrels, it was also the biggest decline in at least six months.
Oil inventories seem to be contracting thanks to Saudi Arabia. On February 12, Energy Minister Khalid al-Falih pledged his country’s output would fall below 10 million barrels a day. That’s part of a deal with Russia (“OPEC plus”) to remove 1.2 million barrels from global supply.
Last year, President Trump successfully pressured Riyadh to keep a lid on prices. But now al-Falih seems a lot less worried about pressure from the White House. Just yesterday he pretty much blew off Trump’s latest request by saying he wanted “market stability first and foremost.”
Looking down the road, OPEC has a meeting in Vienna on April 17-18. There will likely be more chatter about production cuts as that approaches.
Another potential catalyst would be incremental news about trade talks between the U.S. and China. Traders will likely view progress as bullish for energy, because it would lift demand. Further deadlock or conflict could potentially hurt oil.