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Crude steady as DoE oil stocks build lower than API estimate
Crude oil prices have been on a roller-coaster ride to absolutely nowhere in recent weeks. It appears as though the buying and selling pressure in finely balanced. Bullish speculators are encouraged to remain in the game because of the OPEC’s efforts to reduce supply. Bearish traders are encouraged by signs of renewed rise in oil production in the US.
Crude struggles despite surprise draw in US oil stocks
Crude oil struggled to hold onto its initial gains made on the back of the official US oil inventories report. Both contracts initially bounced nicely after the EIA data showed a surprise drawdown of 2.6 million barrels in US oil stocks, rather than a large build as had been reported by API last night. However, it wasn’t all good news as the EIA also reported a 1.1% week-over-week rise in US oil production, while crude stocks at Cushing rose by 1.22 million barrels.
Crude oil outlook worsens as US inventories soar
The bad news for crude oil began recently after doubts started emerging with regard to a proposed OPEC deal to cut oil production. Partly as a result of these doubts, crude oil prices for the past two weeks have virtually been in a state of free fall. Earlier this week, it was reported that OPEC’s oil output may have reached yet another record high in October, casting further doubts on the potential success of any deal to cut production.
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Crude oil remains pressured despite US inventory draw
The West Texas Intermediate (WTI) benchmark for US crude oil prices surged on Wednesday after the Energy Information Administration (EIA) reported that US commercial crude inventories fell by 553,000 barrels last week. The markets had been expecting a substantial build in stockpiles, particularly after Tuesday’s report from the American Petroleum Institute (API), which had reported a much higher-than-expected build last week of 4.8 million barrels. The EIA’s report of a surprise draw last week follows a much larger draw of 5.2 million barrels in the previous week. As a result of Wednesday’s report, WTI initially surged, recovering the losses it had suffered immediately prior to the data release.
Crude oil struggles to shake off oversupply concerns
Oil prices have been extremely volatile of late, without making any significant progress in either direction. The long and short of it is that the stream of mostly negative news has helped to halt the recent rally, while ahead of this month’s informal meeting of the OPEC in Algeria not many people will want to be betting boldly on an oil price plunge. Therefore consolidation is the dominant theme in the oil market at the moment, with a slight bearish bias due to the ongoing oversupply concerns.
Crude turns positive ahead of oil data
Oil prices swung wildly into the positive territory yesterday. The rally eventually came to a halt around the $50 handle for Brent and $48 for WTI, and both contracts have been trending lower from these levels until an hour or so ago. It looks like oil prices have now found some short-covering support ahead of today’s official US crude oil inventories report, due at 15:30 BST (10:30 ET).
Crude may struggle to rise further ahead of Russia-OPEC meeting
The long wait for the much-anticipated Russia-OPEC meeting is almost over. The general feeling is that an agreement will be reached on Sunday in Doha to freeze oil production at January’s levels, with or without Iran’s participation. This outcome is mostly priced in but will still likely give prices a further short term boost. However, will it be a classic case of “buy the rumour, sell the fact” type of a reaction on Monday? Time will tell. In addition, there is a risk that they will fail to find an agreement, in which case oil prices could gap lower at the open on Monday. Given this uncertainty, I would expect at the very least for oil prices to pause at these relatively elevated levels going into the meeting.
WTI crude drops to $40 as oil stocks jump
WTI crude oil fell on the back of data from the US Department of Energy which showed US oil stockpiles rose by a sharp 9.4 million barrels last week. This more or less confirmed the data that was released by the American Petroleum Institute (API) the night before, but it still disappointed the expectations of a much smaller build. However crude stocks at Cushing fell, while gasoline inventories declined by a sharp 4.6 million barrels. So it wasn’t as bad a report as the headline figure made it out to be. Stockpiles have been rising relentlessly despite signs of lower oil output in recent months. But it should be noted that during this time of the year when refineries carry out their maintenance works ahead of the driving season, inventories do tend to rise. Thus, the build is not too much of a surprise. US oil inventories should begin to fall once the driving season starts, while the potential deal between Russia and the OPEC to freeze oil production should also help to reduce the imbalance between demand and supply in the oil market. For that reason, I don’t expect this to be the start of another major downward trend.
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