Oil back near 2019 highs after inventory draw

Summary:

• Weekly Oil inventories: -3.9M vs +2.7M exp

• Larger drawdown than API (-2.6M); Production falls

• Oil moves up to trade near highest level of the year

The main piece of data for Oil traders this week has delivered what is on balance a positive reading for the price of crude, and sent the market back up near its highest level of the year. The weekly EIA inventory release showed a drop of 3.9M, which was comfortably below the consensus forecast for a rise of 3.0M and marks a large drop on the +7.1M prior. Tuesday evening’s API number is often seen as the best gauge of market expectations, and with this coming in at -2.6M today’s more widely viewed release still appears favourable for bulls.

Oil inventories are still relatively high compared to previous years although the 2019 level is converging on the 5-year average. Source: XTB Macrobond  

As well as the headline reading, the subcomponents of the report are also important and these were as follows:

Gasoline: -4.6M vs -3.0M exp

Distillates: +5.0M vs +5.5M prior

Refinery utilisation: 0.10% vs 0.5% exp

Change in US production: -100k

On balance the data on the whole looks mildly positive with US production falling back from its record highs and a sizable draw in gasoline outweighing the rise in distillates. The initial reaction to the release has seen the Oil market spike to its highest level of the day, although the move so far is not too clear and typically volatile.

Oil is back near its recent highs in the upper $67 region after the release and trading at its highest level in over a fortnight. Source: xStation

Longer term the significance of the region around 67.80 is more readily apparent, with a move above there paving the way for a sizable gain. The longer term inverse S-H-S targeting 76.65 remains in play. Source: xStation