Oil Inventory Drop As Improvement In US Crude Oil Demand.
Base on US crude oil report front-month WTI crude oil fell from USD71.50/bbl to USD68.90/bbl in New York trade yesterday despite a contraction in both DOE and US API crude oil inventories. DOE inventory data, released yesterday, showed a 978K barrel contraction in stockpiles for the week ended 2 October while Tuesday’s API data showed a 254K barrel contraction in US crude inventory levels for the same period.
Ordinarily this data should be positive for crude oil prices, particularly as last week’s run on US crude oil inventories, coupled with a 79K increase in API crude imports, signals an improvement in US crude oil demand.
However the overhang of inventory is still so large, that the market remains focused on technical patterns and the currency markets, rather than on the inventory statistics. A net 3,051K barrel build on US API crude oil inventories since 11 September. Although we have seen a 56K barrel run on DOE inventories over the same period, inventory levels at 337,426K are still some 13,420K higher than the 5-year average.
This should continue to weigh on prices and sentiment, and cap the upside. Keeping with this theme, even though the EIA has increased its global crude oil demand forecast by 0.2mbpd to 84.7mbpd - due to sustained Chinese economic growth - it has done so without changing its crude oil price forecasts, sighting large global crude oil inventory levels. It will be interesting to see at what point this cap to prices is removed.
Ordinarily this data should be positive for crude oil prices, particularly as last week’s run on US crude oil inventories, coupled with a 79K increase in API crude imports, signals an improvement in US crude oil demand.
However the overhang of inventory is still so large, that the market remains focused on technical patterns and the currency markets, rather than on the inventory statistics. A net 3,051K barrel build on US API crude oil inventories since 11 September. Although we have seen a 56K barrel run on DOE inventories over the same period, inventory levels at 337,426K are still some 13,420K higher than the 5-year average.
This should continue to weigh on prices and sentiment, and cap the upside. Keeping with this theme, even though the EIA has increased its global crude oil demand forecast by 0.2mbpd to 84.7mbpd - due to sustained Chinese economic growth - it has done so without changing its crude oil price forecasts, sighting large global crude oil inventory levels. It will be interesting to see at what point this cap to prices is removed.
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