Week of May 9, 2016
- Though crude oil inventories rose last week, prices strengthened on speculation the Federal Reserve would not raise rates anytime soon.
- Wildfires in Canada’s oil sands region have reduced Canadian output by about 1 million bbl/day, or to 40% of the region’s normal output.
- Meanwhile, Saudi Arabia announced major economic restructuring, including the replacement of its oil minister, in an effort to diversify its economy and lessen its dependence on oil income.
- The Kingdom’s new oil minister vowed to maintain current production levels and defend its market share.
- Both WTI and Brent crude prices have rallied about 60% since mid-February and are in the mid-$40 range.
- Some experts fear the rally is happening too soon and could stall the production rationalization underway or even spark a resumption of drilling among U. S. shale producers.
- Domestic PE demand remains strong, while supply has been pinched by a heavy turnaround season and an explosion at a plant in Mexico.
- Growing imports have eased the tight PP market in recent weeks; imports could constitute over 5% of domestic supply in 2016.