Daily Times

BANGKOK: Oil prices have started gaining momentum and they were trading near 2016 highs, especially as supply disruptions and output cuts continued to tighten the market. This trend in prices however came along with the traders cautioning that high global crude inventories were still weighing on markets.

International Brent crude futures were trading at 3 cents above their last settlement, while U.S. West Texas Intermediate (WTI) crude futures were unchanged. Both of these contracts remained near the highs of the current fiscal year and touched their top values during the intra-day trading yesterday.

The U.S. Energy Information Administration (EIA) is scheduled to release official storage data later today. “With oil continuing to suffer from supply disruptions… EIA inventory data will be key to price action. Any further decline in stockpiles could see oil’s run higher continue,” the Australia and New Zealand Banking Group Limited (ANZ) said. “With wildfires shifting back towards oil sands operations, the risk of supply disruptions extending into June has increased substantially. Combined with further falls in exports from Nigeria, the physical market is particularly tight,” it added.

Another possible threat to oil production comes from Venezuela where the political and economic situation has the possibility of reducing oil production further. The French multinational bank and financial services company with global headquarters in Paris BNP Paribus said “Supply outages, when set alongside concerns over Venezuelan supply (due to insufficient funds to pay oil companies or spend on the maintenance of loading terminals), represents a significant amount of oil lost in the short-term, which in turn is reflected in firm time spreads at the front of the curve”.

It also said that despite the potential disruptions there was still a large storage outcropping that had to be reduced before the market could swing back into balance. The financial company also said that the global crude inventories were still edging up regardless of the supply disruptions, which means that the production of oil is still more than its consumption.