Global equity markets were firm in quiet trading ahead of the US Fed press conference. The EMI Global Equity Index has recovered all of its early week losses and is now actually unchanged on the week pushing the year to date gain back to 0.6%. Over the last 24 hours, China, Hong Kong and Australia were the only laggards with all of the other bourses gaining ground. The US Dow is now clearly on the top of the leaders board for 2011 with Germany and Paris now closely behind. China has dropped down to the middle of the pack after holding the lead for the last month or so. Investor/traders continue to buy US equities on the premise that the so called Bernanke put (or easy money) remains in place for the foreseeable future. In the UK the latest GDP number released this morning came in within expectations and an improvement over last quarter... a positive for UK and European equities. Heading into today the global equity markets are mostly supportive for oil prices as is the weaker US dollar.
Late yesterday afternoon the API released their latest inventory assessment. The API report was mixed and mostly neutral. The API reported a crude oil inventory build of about 4.9 million barrels as refinery utilization rates only increased by 0.3% to 81.6% of capacity. The API reported a big jump up in crude oil imports. PADD 2 stocks were marginally higher after declining in the previous API report. They showed large surprise declines in inventory for gasoline but a larger than expected build in distillate fuel stocks. Gasoline stocks declined by about 2.1 million barrels while distillate fuel stocks were increased by 1.5 million. The results of the API report are summarized in the following table. So far the reaction to the API report has been mildly bullish although the market is in quiet mode ahead of all of today's macro events. If Wednesday’s EIA report is in sync with the API report I would view it as neutral.
My projections for this week’s inventory reports are summarized in the following table. I am expecting a mixed to bearish report with a modest build in total commercial stocks of crude oil and distillate fuel inventories but another decline in gasoline stocks as refinery runs are likely to increase only marginally on the week. I am expecting crude oil stocks to build by about 0.9 million barrels. If the actual numbers are in sync with my projections the year-over-year surplus of crude oil would come in around 0.1 million barrels while the overhang versus the five-year average for the same week will also narrow to 11 million barrels.