Summary:
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Oil reacts positively to the latest inventory data
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Weekly build of 3.2M inline with forecasts but lower than prior and API
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Brent bounces from near key support around $75.20
The weekly crude oil inventories has shown another build, but with the increase being smaller than both the prior week’s and the latest API it has actually caused a positive initial reaction in the market, with Oil up around 60 ticks in the hour since the release. A read in the headline number of 3.2M was pretty much bang inline with forecasts, and while it marks a 6th consecutive weekly build it is significantly lower than the 6.3M seen previously. Last night’s API rose by 5.7M barrels and also against this, today’s number doesn’t look quite so negative for the price of oil.
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Inventories this year are back above the 5-year average for crude oil after the recent weeks of builds. Source: XTB Macrobond
As always the following components can also impact the market, listed in the format of actual vs expected unless otherwise stated:
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Gasoline: +3.2M vs -2.3M
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Distillates: -4.1M vs -1.6M
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Production 11.2 mbpd vs 10.9mbpd
The gasoline and distillate inventories are sending mixed messages here but the production could be seen as quite negative for the market. A reading of 11.2m barrels per day is in line with the cycle high and suggests that the US is continuing to ramp up its production which has been rising for the past decade due to the shale revolution.
US oil production continues to rise, with the latest figures as high as they’ve been during this cycle. Source: Bloomberg
Oil has had a bad month with heavy declines and fallen over $10 after hitting a 4-year high at the beginning of October at 86.73. The market does appear to be in a longer term uptrend still, with price remaining above the 200 day SMA and if near term support around 75.20 holds then double bottom will have formed. Source: xStation
An interesting observation with the price of Brent crude is how tightly it has correlated with US stocks of late. The past month the price of Oil and the US500 have moved lower almost in lockstep after a long period where there was a notable divergence. This could mean that a recovery in stocks bodes well for Oil should it occur. Source: xStation
