The U.S. Energy Information Administration (EIA) recently released its data showing a 5.654-million-barrel figure, which is higher than the 3.114-million-barrel draw predicted. Such increase came as a shocker to many oil stake holders, prompting OPEC+ to put more pressure on over-producers such as Nigeria and Iraq, to meet the level of compliance set by limiting their oil production.
Recall that barely two months ago, Nigeria and Iraq were reported not to have honoured their pledges, and had promised to limit global crude oil production by 9.7 million barrels of crude oil per day.
Iraq was able to achieve about 38% compliance rate of its agreed output cut for the month of May, while Nigeria, achieved much lower compliance of the agreed output cut, recording 19% compliance of what was agreed.
Brent crude was slightly up by 0.04% to trade at $43.23 at 5:42 am local time on Thursday, while the West Texas Intermediate was slightly down 0.7% to trade at $40.87.
“The market is struggling to get strong conviction to the upside at the current point in time,” said Lachlan Shaw, head of commodity research at National Australia Bank in a note to Reuters. “There’s mixed evidence on demand.”
The implied volatility for Brent crude price has plunged it to the lowest levels triggered by prices collapsing at the end of Q1 2020 as many oil traders shifted their attention to tightening oil output due to the agreement with the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
Meanwhile, Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, spoke about the macros that oil traders are taking seriously. He said:
“The industry seems more focused on medium and long-term drivers for oil. Still, traders are keeping an eye out for signs of a reaction to US production data and news on new Covid-19 infection numbers. US crude production was flat for the second consecutive week at 11mbd, down 1.3mbd y/y and down 2.1mbd from March. The EIA’s short-term energy outlook cut US production estimates for May and June but increased them for the second half of this year and 2021.”