Oil mixed after smaller than expected inventory draw

Summary:

• DOE crude Oil inventories: -1.2M vs -3.5M exp

• Drawdown far smaller than prior (-7.3M) and API (-10.2M)

• Oil markets are mixed after the release

There’s been some steady gains seen in the crude oil markets today with both Oil and Oil.WTI higher by over 1% at the time of writing. The latest inventory data has shown a second consecutive weekly drop, but with the decline being smaller than expected it hasn’t really provided much of a boost. The DOE number came in at -1.2M against a median forecast of -3.5M after last week’s print of -7.3M. Given that last night’s private API reading showed a mammoth drop of -10.2M if anything this data by itself is a little negative for price and the initial reaction did in fact see the market fall to its lowest level of the day.

Oil briefly fell to its lowest level of the day after the smaller than forecast drawdown but price soon recovered and the market rallied back near to its daily highs and possible resistance around 61.40. A decisive break above 61.40 would be a clear positive and pave the way for further gains. Source: xStation

Looking at the report more closely several of the subcomponents are shown below in the format of actual vs expected unless otherwise stated:

Gasoline: +2.1M vs +2.3M exp

Distillates: -1.5M vs +1.9M exp

Production: +11.6 mbpd vs 11.7 mbpd

The first two here don’t really mean too much but could be seen as slightly positive due to the distillates draw. The biggest takeaway though may be the dip in production. While it is only for 100k bpd it is a drop nonetheless and seeing as we were at record highs it could be seen to possibly marking a high-water mark.

Looking at a longer term chart there’s not much that has changed for Oil, with price continuing to consolidate. It has now been 3 weeks that 57.80 has provided a floor for the market and 63.70 a ceiling. There’s been a fair amount of chop of late but overall until this range is broken the scope for a sustained move is limited. A break to the downside would open up the possibility of an extension of the large declines seen since the start of October whereas a break above 63.70 would allow crude bulls an opportunity to recoup some of the losses.

Oil remains confined to a roughly $6 range from 57.80-63.70. A break out of this consolidation could well lead to the next sustained move. Source: xStation