Discussion: Oil prices and Supply and Demand

Please read thefollowing Wall Street Journal articlethen explain what is transpiring in the market for oil.

Article: Oil Rises on Steady Demand as Production Increases (PDF)Download Article: Oil Rises on Steady Demand as Production Increases (PDF)

By the way, this writing is a couple of years old, but the gist contains much about oil and how its "traded." Enjoy.

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The Wall Street Journal Article: Oil Rises on Steady Demand as Production Increases Oil prices moved higher in advance of the monthly inventory from major oil producing nations Oil prices moved higher as investors anticipated the monthly report from major oil producing nations. PHOTO: ERNEST SCHEYDER/REUTERS By Christopher Alessi and Benjamin Parkin The Wall Street Journal June 12, 2018 Oil prices rose on Tuesday after a monthly report from the global oil cartel showed solid demand alongside higher output. West Texas Intermediate futures for July rose 0.4% to $66.36 a barrel at the New York Mercantile Exchange. The Organization of the Petroleum Exporting Countries said on Tuesday it pumped 35,000 extra barrels a day in May from a month earlier, to average 31.87 million barrels a day. Higher output was driven by the cartel's de facto leader Saudi Arabia, which pumped 85,500 more barrels a day, but partly offset by production outages in Nigeria, Venezuela and Libya. However, OPEC kept its world oil-demand forecasts largely unchanged at a growth rate of 1.65 million barrels a day, meaning demand should stand at 98.85 million barrels a day this year. "The overall supply and demand fundamentals look pretty good globally," said Kyle Cooper, a consultant for ION Energy. "Global production is not soaring, even as U.S. production never ceases to astound and amaze." OPEC raised its forecast for non-OPEC supply for this year by 130,000 barrels a day to 59.75 million barrels a day, largely as a result of burgeoning U.S. shale-oil production. The cartel predicts total U.S. crude output to grow in 2018 by more than double the rate last year, to average a record 10.51 million barrels a day.

Mr. Cooper said prices had fallen far enough from three-year highs reached in May to satisfy traders who had bet on lower prices. That in turn created room for a bounce as some of them cashed in, he said. Enthusiasm over oil's rally has waned in recent weeks as traders speculate OPEC and its allies may raise production caps at a meeting next week, after more than a year of holding back output by around 1.8 million barrels a day. The coordinated production cuts, set to expire at the end of this year, helped boost prices by more than 40%. But geopolitical risks to supply in Iran and Venezuelatwo OPEC membersprompted the Saudis and Russians to reconsider the output curbs in recent weeks. "The geopolitical risks which remained front and center for most of May have now been superseded by a policy shift by OPEC+, wherein they are deliberating to revive output on concerns that prices have risen too much, leading to weakening demand and a slowdown in the global economy," according to Ehsan Khoman, head of research for the Middle East at MUFG Bank, Ltd. Brent crude, the global oil benchmark, fell 0.8% to $75.88 a barrel on London's Intercontinental Exchange. Traders also pointed to seeming progress at unprecedented talks between U.S. and North Korean leaders as a positive signal for the global economy and, by extension, crude demand. President Donald Trump signed a document with Kim Jong Un that he described as "very comprehensive." Both sides pledged to work toward the denuclearization of the Korean Peninsula and to begin high-level negotiations at the earliest possible date, despite providing few particulars on timing and verification of North Korean disarmament. The oil market is also looking ahead to the release Wednesday of the International Energy Agency's monthly oil-market report, as well as data on U.S. petroleum inventories from the Energy Information Administration for the week ended June 8. The American Petroleum Institute, an industry group, said late Tuesday that its own data showed crude oil inventories rose by 833,000 barrels, according to a market participant, with gasoline stocks rising by 2.3 million barrels and distillate inventories 2.1 million barrels higher. Among refined products Tuesday, gasoline futures for July fell 0.7% to $2.0899 a gallon while July diesel contracts rose 0.1% to $2.1618 a gallon.