Commodities: US oil production to fall sharply in 2017, DoE says

The commodities complex was awash in green on Wednesday as energy futures moved into positive territory late in the afternoon on the back of the latest weekly US oil inventory data and gloomy projections from the Department of Energy.

Front month West Texas Intermediate finished up by 1.74% to $43.22 a barrel while Brent crude was higher by 1.65% to $44.78.

According to the Energy Information Administration, the US Department of Energy’s statistical arm, commercial oil stockpiles increased by 2.1m barrels to hit 538.6m in the five days ending on 15 April.

That was less than 2.75m build which analysts had pencilled-in and came alongside a 3.6m drop in distillate inventories.

In another report published on Wednesday, the EIA forecast that onshore oil production from the Continental US would decline from an average level of 7.41m barrels per day in 2015 to 6.46m b/d in 2016 and 5.76m b/d in 2017.

Rising output from the Gulf of Mexico would act as a partial offset, the EIA said, but even so total US oil output would shrink from 9.43m b/d in 2016 to 8.04m b/d in 2017.

Venezuelan oil output might also be affected if dangerously low water levels at the Guri dam - which provides the South American country with a third of its power - is forced offline to avoid damage to the turbines, the FT reported citing analysts at Petromatrix. Power shortages could lead to a drop in Venezuela's oil output of between 100,000 to 200,000 barrels a day in 2016, the newspaper said citing analysts.

The latest reports from the US and Venezuela offset news that the strike of public sector workers in Kuwait had been called off.

Other recent disruptions around the globe had affected oil supplies from countries including Nigeria, Libya and Iraq.

Natural gas futures were also subdued and the outlook was not particularly strong, according to Credit Suisse.

“For US natural gas we already feel confident that this whole year will be below par - we project that prices this year at the futures hub will average little more than $2/MMBtu, and that markets are unlikely to see $3/MMBtu or more until next year, because current fundamentals are that weak,” the Swiss broker said.

Industrial metals continued to see gains, with aluminium pacing the advance in Wednesday’s session, with three-month primary aluminium futures closing up by 2.0% to $1,618 per metric tonne.

Silver futures were 0.99% higher to $17.14/oz. on COMEX.

“The gold-silver ratio has fallen sharply as a result. This indicator is sensitive to changes in perceptions about the economy and could therefore be seen as another signal of strengthening sentiment for industrial commodities,” UniCredit said in a research report sent to clients.

Meanwhile, and among agricultural commodities, corn and milling wheat futures did well on Euronext LIFFE, clocking in with gains of 2.4% to €163.25 per tonne and 2.0% to €155 per tonne, respectively.

Out on ICE, No.16 sugar futures were to be seen up by 3.3% to 28.5 US cents per pound.