Summary:
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US crude inventories show large build of 8.0M
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Largest build in 19 months and well above forecast
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Price initially drops lower but is aggressively bought; uptrend remains intact
There’s been some big swings in the Oil price in the past hour as crude first dipped lower then bounced strongly following the latest inventory figures from the US. These moves can be explained by the inventory figure showing the largest rise in 19 months (negative for crude) but this doesn’t really change the longer term outlook (which we focus on more in our earlier post here) and as such there seems to have been many buyers waiting on the sidelines for chance to get involved.
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Oil has fell initially on the release, but this drop represented a nice buying opportunity with buyers stepping in aggressively and driving price up by over 150 ticks off the lows. Source: xStation
The data itself from the EIA report can be found below in the form of actual vs expected unless otherwise stated.
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Oil inventories: +8.0M vs +1.5M
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Gasoline: -0.5M vs +1.3M
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Distillates: -1.8M vs -1.3M
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Cushing: +1.7M vs +2.0M
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Production: 11.1 mbpd - inline with the previous week
Delving a little deeper into these components it does appear that the overall data isn’t that negative for crude with gasoline and distillates both showing larger than expected drops. On the other hand cushing did rise but less than expected, so this is also not negative for price. The recovery could be attributed to these other aspects of the report to some extent but overall it feels more a case of an uptrending market that has been rallying on supply concerns surrounding Iran and Venezuela and 1 weekly build in US inventories doesn’t change that. Overall this year has seen a decline in US stockpiles and it would take a prolonged period of sustained builds until these figures would start to challenge the narrative of a tightening of supply which is driving price higher.
The market rallied up to make a new 4-year high at 85.69 and extend on the recent rally seen since price breached 79.75 at the start of last week. Source: xStation
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