London, 1 February 2012

Commerzbank Commodity Research: Despite all the supply risks relating to Iran and Sudan, the oil market is currently characterised by excess supply, which explains the recent below-average trend in the price of crude oil. Surveys by Bloomberg and Reuters show that oil production in the OPEC countries reached almost 31m barrels per day in January - the highest level since October 2008.

OPEC is thus currently producing around 1m barrels per day more than the targeted level and demand. OPEC's excess production corresponds broadly to Libya's oil prodution which increased to almost 1m barrels per day in January. According to Libyan sources, production had already reached well in excess of 1m barrels per day again by the end of January.

The other OPEC countries have not yet cut their oil production to balance out the resumption of the Libyan supply. It is therefore not surprising that crude oil stocks in the US have increased again recently. According to the American Petroleum Institute, stocks of crude oil increased by 2.1m barrels last week, with levels already having been topped up by 7.3m barrels in the previous week.

Another surprising factor is that crude oil stocks at Cushing have increased by 1.5m barrels, their highest level for nine months. The threatened strike at US refineries has been averted overnight. Had the strike gone ahead, up to 6% of US refinery capacity would have been withdrawn. The agreement supports a narrowing of price differentials between oil products and crude oil which had recently increased sharply due to a feared supply shortage of oil products.

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Source: Commerzbank Commodity Research
https://research.commerzbank.com