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Oil runs into resistance at $70 ahead of OPEC, inventory reports
Oil tested big resistance at $70 this week as prices hit their highest since before the pandemic, however a lack of momentum has seen WTI ease back ahead of the OPEC monthly report this week and the usual EIA crude oil inventories report.
Three-year high for WTI
WTI and Brent contracts rose sharply last week to make new highs as OPEC+ stuck to its plan to only slowly raise the level of output through to July. Whilst vaccines and the reopening of economies have left the market in deficit, helping to drive prices up 35% this year, the persistence of cases in some parts of the world combined with ongoing travel restrictions in Europe/US means there are still doubts about how quickly demand will recover this year.
Nevertheless, prices hit their highest in almost three years on Monday as the situation in India in terms of covid cases seemed to improve, whilst the post-OPEC bounce held firm.
Thursday sees the release of the latest OPEC monthly oil market report. Last month’s report saw the cartel reiterate its belief in a strong recovery in world oil demand in the second half of 2021. This month’s report is not expected to show much change from the previous version, which said demand will rise by 5.95m bpd this year, up 6.6% from 2020 levels.
Ahead of this, traders will look to Wednesday’s inventory report from the Energy Information Administration (EIA). Last week’s EIA inventory report showed stockpiles declined by 5.1m barrels, a larger-than-expected draw that helped to support the bullish view on oil prices as demand in the US recovers.
OPEC in control?
The world’s largest oil trader said this week that the US has handed back control of the oil market to rivals.
OPEC+ seem to have the handle on crude prices as S. production has failed to catch up to pre-pandemic levels, Mike Muller, Vitol’s head of Asia, said at an online conference. “There’s a perception in the market that control is with OPEC+,” Muller said at the Gulf Intelligence event. “It will take a long time for US oil to come back.”
Meanwhile traders are also eyeing Iranian oil coming back on stream as a potential nuclear deal moves tentatively closer.
US EIA Oil Stocks preview: Oil rattled as Trump cancels stimulus talks
US oil stockpiles rose by more than expected during the week ending October 2nd.
Data from the American Petroleum Institute showed that oil inventories had grown by 951,000 barrels – more than double the 400,000 barrel build analysts had predicted.
The larger-than-expected build follows a smaller-than-expected draw the week before, casting doubts over the robustness of demand in the US.
While gasoline stocks fell by -867,000 barrels during the same period, this was a little short of forecasts and only just over half the size of the build reported the week prior. Distillate inventories fell by just over a million barrels after the previous week’s -3.4 million barrel drop.
Trump tweets: No stimulus discussions until after the election
Also weighing on crude oil sentiment today is the abrupt cancellation of negotiations over a new stimulus package.
President Trump, fresh out of hospital following his Covid-19 diagnosis, tweeted that the Democrats were ‘not negotiating in good faith’ and that talks would not resume until after the election.
Although markets still expect stimulus regardless of who wins the election, the cancellation of talks adds more waiting time to the already delayed second dose of fiscal support.
US EIA Crude Oil Inventories report on tap
Oil traders will be looking for an upside surprise today when the official US Energy Information Administration data is published.
Last week’s report showed a drop in oil stockpiles of nearly -2 million barrels. Analysts this week are expecting to see an increase of nearly 300,000 barrels.
The report is due at 14.30 UTC.
EIA oil inventories preview: Crude struggles after mixed API data
Both benchmarks headed back towards the two-week lows hit yesterday before returning to trade just under opening levels.
Crude is on track to record its first monthly loss in five months, while Brent looks set to end lower for the first time in six months.
API: Oil draw falls short, surprise gasoline build
The API reported a smaller-than-expected draw in crude oil inventories and a surprise build in gasoline inventories.
Crude oil inventories fell by 831,000 barrels in the week ending September 25th, against analyst forecasts of a 2.256 million barrel drop.
Gasoline inventories also disappointed forecasts, rising by 1.623 million barrels during the same period, instead of falling by 1.3 million barrels as expected.
In more supportive news, US oil production fell to 10.7 million barrels per day.
Rising coronavirus cases raise questions over global recovery
The rising number of coronavirus cases as winter approaches in the Northern Hemisphere has heightened fears of new restrictions that could curb economic activity and therefore demand for oil.
While certain parts of the global economy are bouncing back, others continue to be hammered by the pandemic. Airlines are a key market for oil and various restrictions combined with a general fear of air travel given the current circumstances has seen a huge drop in bookings.
On Tuesday the global Covid-19 death toll passed the 1 million mark, up from 500,000 three months ago, with the number of infected exceeding 33 million.
Traders are also worried that the US Presidential Election may not produce a clear winner on November 3rd, leading to more disruption for the world’s largest economy as both Trump and Biden contest the results.
US EIA oil inventories preview: Crude edges higher on mixed API report
Crude oil has moved off from the day’s lows of $39.30 to test $40.00, while Brent has risen back towards $42.50 after earlier falling towards yesterday’s intraday lows around $41.61,
Mixed API report shows unexpected oil build, large gasoline draw
The latest US oil inventories report from the American Petroleum Institute showed a surprise build in crude stockpiles.
US oil inventories rose by just shy of 700,000 barrels in the week ending September 18th, according to the latest API report. Analysts had predicted that crude stockpiles fell by 2.256 million barrels.
Although moving in the wrong direction the build is relatively small, especially considering the dent to inventories made by the previous week’s 9.517 million barrel draw.
The report revealed that US oil production increased during the period, but at 10.9 million barrels per day is still 2.2 million bpd below the highs of 13.1 million bpd seen in March.
Sentiment had also been supported by a much larger-than-expected draw in gasoline, with stockpiles falling by 7.735 million barrels compared to analyst’s expectations of a 614,000 barrel drop. Distillates fell by over 2 million barrels.
The official US oil inventories report from the Energy Information Administration is due out later today.
US EIA oil inventories preview: Crude tries to claw back losses
Crude oil fell -7% yesterday to close at $36.88, while Brent closed -5% lower at $40.03. Both are moving higher today, with WTI up $0.60 and Brent up $0.53, but September losses are still in excess of -11%.
Saudi Aramco will cut prices for Asian buyers for a second consecutive month, and will cut prices for US refiners for the first time in six months. Chinese refiners have been snapping up cheap oil, importing record amounts recently, but it seems that stockpiles are now filling up.
It’s another worrying sign for the demand outlook, just a month after Aramco’s chief executive claimed Asia’s oil demand was almost back to pre-crisis levels.
Bank of America research adds to fears over oil demand recovery
At first it had been hoped that the global economy would pick up sharply once lockdowns were lifted, but the increasing numbers of coronavirus infections and some soft eco-data has put these assumptions into doubt.
Indeed, Bank of America Securities predicted yesterday that global oil demand won’t return to pre-pandemic levels for another three years. BofAS analysts point to the collapse in air travel, which they claim won’t be able to recover fully until a vaccine is developed – something they believe is still 12-18 months away.
US EIA crude oil inventories data delayed by Labor Day holiday
This week’s US crude oil inventories data is delayed by a day due to Monday’s Labor Day holiday. Figures from the American Petroleum Institute will be published at 20.30 UTC today, with the official Energy Information Administration data due at 15.00 UTC tomorrow (September 10th). EIA natural gas storage figures are released at 14.30 UTC as per usual.
US EIA Oil Inventories Preview: Crude edges higher after sixth straight API draw
Crude and Brent oil have moved slightly higher this morning after data from the American Petroleum Institute revealed another huge drawdown in US oil stockpiles.
WTI has edged up $0.17, or 0.4%, and Brent oil has added $0.24, or 0.5%. Both benchmarks are trading above their recent long-term ranges, although below the highs struck last week when prices reached levels not seen since early March.
API oil inventories: another huge decline for US stockpiles
The latest API report revealed another large draw from US crude oil stockpiles in the week ending August 28th.
As has become usual recently due to the highly unusual conditions in the market, the actual draw of 6.360 million barrels hugely outpaced the 1.887 million barrel drop that analysts had predicted.
Last week the API reported a 4.524 million barrel drop against expectations of a 3.694 million barrel decline.
Last week was the sixth consecutive week that oil stockpiles declined. Gasoline inventories also fell, with the draw of 5.761 million barrels representing only a slight moderation from the 6.392 million barrels the week before. Analysts had expected gasoline stocks to fall by just over 3 million barrels.
Distillates were down 1.424 million barrels, erasing a bit over half of the build seen the previous week.
Official data from the US Energy Information Administration is due for release during today’s New York session.
US manufacturing uptick supports crude
Oil market sentiment has also been lifted by recent US manufacturing data. The ISM manufacturing index for August climbed to 56.0 from 54.2. Analysts had expected the index to register a mild uptick to 54.5.
The reading is the third month of growth after the sector was hammered by the coronavirus lockdowns, and is also the highest reading since November 2018.
US EIA Crude Oil Inventories preview: Oil erases losses on broad inventory drawdown
Crude oil has erased yesterday’s losses and Brent is close to doing so as well after private oil inventories data yesterday showed a large draw.
WTI (SEP) has gained $0.40 (1%), although remains near the middle of its recent trading range at $42.14. Brent is $0.33 (0.7%) higher to trend just above $45.00. Both benchmarks had spiked to their second-highest levels since March yesterday in the wake of the latest data from the American Petroleum Institute.
Private data shows larger-than-expected oil, gasoline draws
API data released yesterday showed a drop in crude inventories of 4.4 million barrels during the week ending August 7th. Analysts had expected a drop of 2.875 million barrels.
The figures continue to point to strong demand recovery in the US, helping to counterbalance some of the downside pressure on crude as OPEC members begin scaling up production after cutting by record levels between May and July.
Further improving sentiment was a larger-than-expected draw from gasoline inventories. Stocks fell by 1.748 million barrels against expectations of a 674,000 decline.
US EIA Crude Oil Inventories forecasts
Forecasts for the US EIA Crude Oil Inventories report suggest a drop, but as we’ve seen previously both the direction and magnitude of the change often takes analysts by surprise. Predictions for the past four weeks’ worth of US EIA data have been way off the mark in terms of the size of the change, and wrong about the direction twice.
After the API data many traders will be expecting to see a similar decline in inventories when the EIA publishes its official figures.
As well as the latest inventories data, traders can also expect fundamental updates from today’s Monthly Oil Market Report published by OPEC, and tomorrow’s Oil Market Report from the International Energy Agency.
US EIA oil inventories preview: Crude rises on massive API draw
WTI has smashed through resistance at $42 and is now testing $44 after adding $1.65 (4%). Brent has added $1.60 (4.5%) to climb towards $46. Prices have risen after the latest API data, released yesterday, showed that US oil inventories fell 8.587 million barrels in the week ending July 31st.
This was over double the drawdown expected by analysts, and means that US inventories have declined by over 15 million barrels in the last two weeks.
Official data from the US Energy Information Administration is due during today’s New York session. Last week’s report showed a 10 million barrel decline, and a 3 million barrel drop is expected for the week ending July 31st although the API data suggests the real number could be much higher.
Is crude oil demand recovering?
Another large weekly draw suggests that oil demand is recovering in the United States, and traders will be hoping that this will offset the impact of increased output from OPEC and its allies as production cuts are scaled back from record levels. Markets have had to rein in their expectations for demand recovery, which looks set to be weaker during the second half of the year than initially predicted.
Oil prices have also been supported by another decline in the dollar. The Dollar Index (DXY) has fallen to test 93.00 today, close to the two-year lows seen at the end of last week.
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US EIA Oil Inventories Preview: Crude edges higher on surprise API draw
Crude and Brent oil continue to trade sideways today, with crude adding $0.38 and Brent up $0.40 to reclaim around half of yesterday’s losses.
While crude oil has managed to rise above previous long-term resistance at $41, a new ceiling at $42 has quickly been established, and WTI continues to trade within a narrow range. It is the same story for Brent – a break above $44 early last week couldn’t be sustained.
API data surprises with large crude draw
Today’s gains have been prompted by the latest American Petroleum Institute’s crude oil inventories data, which has surprised with a sizeable 6.829 million barrel draw. Analysts had expected to see a mild increase of 357,000 barrels.
While this points to better-than-expected demand, it’s worth noting that last week’s figures revealed a shock build of 7.544 million barrels against expectations of a draw.
Stimulus talk, FOMC meeting limit upside for oil
Also capping gains are delays to the next US stimulus bill. Republicans and Democrats are still debating the measures – Democrats claim they don’t go far enough, but President Trump also has criticisms of the bill.
Oil gains could accelerate on this afternoon’s US crude oil inventories data from the Energy Information Administration. Analysts predict a build, but after the API’s figures we could see the data confirm a large, unexpected draw instead.
Market focus on tonight’s announcement from the Federal Open Market Committee could keep a lid on price action. Traders are expecting the FOMC to reaffirm its commitment to stimulus – the Federal Reserve has already announced that its lending programmes will continue until the end of the year, beyond the original September end date.
However, if policymakers don’t sound as dovish as markets expect this could fuel a rebound for the dollar, which this week hit two-year lows. Dollar strength would put downside pressure on crude and Brent even if the latest inventories data is positive.
US oil inventories preview: EIA data to confirm the biggest draw this year?
Crude oil has been able to power through the $40 handle today ahead of the US EIA crude oil inventories data, following a forecast-beating draw revealed by the American Petroleum Institute.
The latest API report estimated an 8.156 million barrel draw from US oil stocks last week, smashing forecasts for a draw of 710,000 barrels.
If accurate, it will be the largest draw of 2020 so far. Gasoline stocks also fell more than expected, with a draw of 2.459 million barrels last week, down from the previous week’s 3.856 million barrel drop, but still almost one million barrels higher than analysts had predicted.
US oil inventories report boosts oil after indecisive session
West Texas Intermediate crude oil had tumbled through the $40 handle to close at $38 per barrel on June 24th. Since then the benchmark has recovered, with yesterday’s API data helping oil gain around $0.60, or 1.6%. Yesterday’s indecisive trading saw prices briefly rise above $40 before retreating to close virtually flat at $39.60.
Brent oil has risen $0.60, or 1.5%, today to trade above $42 for the first time in five days.
The huge draw was some welcome news for oil bulls, after the commodity had been stuck trading sideways in line with other markets as investors struggled to weigh up improving economic data and rising numbers of coronavirus infections.
The API data has given crude oil fresh impetus on a day that could otherwise have seen more range bound trading.
On a positive note, the Chinese Caixin Manufacturing PMI beat expectations, rising from a revised 50.7 to hit 51.2 in June, against forecasts of 50.5.
But on the other hand, the US has recorded its biggest single day spike in cases since the pandemic started after reporting 47,000 new Covid-19 infections, raising fears that parts of the economy may have to be shuttered again to prevent further spread, which would hamper the recovery and dent the outlook for the oil demand.