Oil pauses after inventory build

Summary:

• EIA crude oil inventories: +1.9M vs -0.7M exp. -2.1M prior

• Russia’s Novak and Trump comments on Iran

• Oil moves off lows of the day and trades near 4-year peak

The US inventory figure for crude oil has shown a weekly increase for the first time in 6 weeks but given that the increase was below the private API number it has actually caused a move higher in the market, with Oil moving off its lows in the initial reaction. The EIA figure itself showed an increase of 1.9M, above the consensus forecast for a 0.7M fall and the prior reading of -2.1M. However, given that last night’s API release showed a build of 2.9M the number could be viewed as more mixed.

Oil has moved off its lows following the DOE release with the market holding support above 80.50. Last night’s API showed a larger build and even though price fell lower it soon recovered. Source: xStation

As always, in addition to the headline figure it is worth looking at the components of the report which are shown below in the format of actual vs expected unless otherwise stated.

• Gasoline: +1.5M vs +0.7M

• Distillates: -2.2M vs +0.3M

• Refinery utilisation: -5.0% vs -1.0%

• Production 11.1 mbpd vs 11.0 mbpd prior

The decline is distillates here is a bit unexpected and could be seen as positive for price while the further increase in production has seen output hit its highest level in several decades.

Around the same time as the release Russia’s Novak has made some comments on the oil market. Novak says that the country can increase their oil output but that they won’t necessarily do it. This is interesting to the point that OPEC+ just last weekend said that they will keep their output at present levels and it further reaffirms the notion that the group has the ability to raise supply should they wish - but at present it appears that they don’t.  

Not long afterwards US president Trump said once more that the US will pursue sanctions against Iran. Trump said again that the sanctions will be applied from November and these sanctions will be tougher than ever before. In a rather comical twist earlier, Bijan Zanganeh, Iran’s Oil minister pointed out that Trump’s interference in the MIddle East is one of the main reasons for the recent gains. “Mr Trump is trying to seriously reduce exports of Iran’s oil and also ensure the price of oil does not go up, but these two cannot happen together,” Zanganeh said, according to the Iranian Students’ News Agency.

The longer term outlook for Oil remains positive but given the recent strong gains the market appears to be pausing somewhat. Recent highs of 81.80 remain possible resistance while the breakout level from 80.50 could provide support. On a closing basis 79.75 is another level to look to and unless the market closes back below there then the breakout remains valid. Source: xStation