Oil market uptick extends into fourth session despite higher US inventories

Oil futures rose for the fourth consecutive session on Thursday (5 April) despite bearish data from the US, with market sentiment turning yet again in favour of oil production cuts, instituted by 11 non-Opec producers in concert with Opec, being extended.

The historic agreement, a first of its kind in 15 years, was inked by both sets of producers in December 2016. It was designed to take almost 1.8m barrels per day (bpd) of crude oil production offline and is due to expire towards the end of June.

At 5:09pm BST, the Brent front month futures contract was up 0.90% or 54¢ to $54.85 per barrel, while the WTI was up 1.06% or 54¢ to $51.69 per barrel, despite another uptick in US stockpiles.

Overnight, the US Energy Information Administration (EIA) reported a surprise increase of 1.57m barrels in crude oil stockpiles, raising total US inventories to a record 535.5m barrels.

Furthermore, US oil production rose by 52,000 bpd to 9.2m bpd, as rig counts continue to point to an uptick in activity stateside. Meanwhile, research conducted by data aggregator S&P Global Platts suggests Opec's promised cuts continue to proceed at pace, with the cartel's output falling for the fourth straight month in March, dropping to 31.85m bpd as it "continues to show relatively strong adherence to its production cut."

The March output figure represents a 180,000 bpd drop from February, and a 960,000 bpd drop from October 2016; the benchmark month from which Opec agreed to cut about 1.2m bpd to hasten the market's rebalancing.

Nigeria and Libya, which are exempt from the cuts, saw significant declines in production during the month, along with Angola, Venezuela and the UAE. Opec's largest producer Saudi Arabia averaged output of 10.0m bpd, still below its quota under the deal of 10.058m bpd, "but closer than it has been in previous months," according to the Platts survey.

On a related note, Fitch Ratings, warned that major oil exporting countries in Emerging Europe, the Middle East and Africa (EEMEA) "still face pressure from low oil prices" nearly three years after the oil price shock hit. The ratings agency forecasts oil prices to average $52.5 per barrel in 2017, up from $45.1 in 2016.

"Oil prices have started to recover, but remain below levels that would balance government budgets in a majority of large EEMEA exporters," the agency warned.

Gold mounts muted recovery

Away from the oil market, gold prices registered a muted recovery following a volatile session on Wednesday. At 5:32pm BST, the Comex gold futures contract for June delivery was up 0.47% or $5.90 intraday to $1,254.40 an ounce, while spot gold was trading at $1,252.98 an ounce, down 0.22% or $2.78.

FXTM research analyst Lukman Otunuga said mounting geopolitical uncertainty across the board ensured the yellow metal returned to buoyancy.

"With the Brexit negotiations, elections in Europe and Trump antics likely to create a risk-off atmosphere, gold remains somewhat supported in the medium term. From a technical standpoint, bulls need to break above the stubborn $1,260 resistance for a market uptick to continue."

Elsewhere, Comex silver was up 0.35% or 6¢ to $18.25 an ounce, while spot platinum was 0.78% or $7.55 lower at $954.35 an ounce.