On the other hand the US dollar has been back under pressure as of late and is providing a modicum of external support for the oil complex. The US Dollar Index has depreciated strongly in value since the middle of July with the Index sitting at the lowest level it has been at since early May...when WTI was trading at its yearly high of about $115/bbl. With WTI now trading around $87.50/bbl you can see why I said the dollar is only acting as a modest support for oil prices.
That all said I still think the US Dollar Index is in a consolidation or bottoming pattern as the fundamentals evolving in Europe suggest that the ECB is now more likely to move back to an accommodative monetary policy which would result in pushing the euro lower and firming the US dollar. If this scenario does in fact occur (I think it has a decent probability of occurring) it would be a bearish outcome for oil prices and would serve to at least cap prices in the short- to medium-term. The Bank of England just announced that they are leaving interest rates unchanged after signaling last month that they were on the cusp of raising rates.
For the moment the strongest support for oil prices over the short term has been the improving fundamental situation. Last week the inventory reports were exceptionally bullish and so far the first part of this week's reports...API data... has been bullish once again. The API reported another surprise draw in inventory except this time it was a 5.4 million barrel draw in gasoline inventories even as refinery utilization rates surged by 0.5% to 87.2% of capacity. They showed a surprise draw in inventory for distillate fuel as well as for gasoline stocks. The market was expecting a modest draw in gasoline stocks and a modest build in distillate fuel inventories this week. On the week gasoline stocks decreased by about 5.4 million barrels while distillate fuel stocks were also lower by about 1.3 million barrels. The only bearish item in the report was the surprise build in crude oil inventories of 1.7 million barrels. However, the API reported a big draw of about 2.0 million barrels of crude oil in PADD 2 with the big build coming in PADD 3 as SPR oil continues to hit the market. Crude oil stocks in the mid-west are not as high as they once were and with this week's increase they are around the level they were at back very earlier in the year. So far the market has reacted very positively to the API report...especially for gasoline... as the industry awaits the EIA report later this morning. The results of the API report are summarized in the following table. If today’s EIA report is in sync with the API report I would view it as simply bullish.