This is not to say that the contracting economy in the US is not a big negative also but for the moment the market views Europe as a bigger problem. The market got a little more confidence knowing that at least someone is actually worry about the economy in the US as the Washington, DC politicians continue to position themselves for next year's elections. Fed Chairman Bernanke in his remarks to Congress yesterday indicated that the Fed would get even more aggressive if the economy warranted such action. The economy warranting more aggressive action could come sooner than later as the market awaits another snapshot of the horrible unemployment situation in the US on Friday morning with some of the pre-jobs reports hitting the media airwaves as early as this morning ...ADP data today and initial jobless claims tomorrow morning. These pre-reports have also been market movers of late and with some mediocre macroeconomic data coming out of Europe today any negativity will quickly derail the ongoing short covering rally. Overall the externals still point to a further slowing of the global economy.
The rally in US equities did not move uniformly around the globe as shown in the EMI Global Equity Index table below. In spite of a bit of a recovery in some bourses the EMI Index still lost about 0.23% over the last twenty four hours and remains in bear market territory for the year to date with a 23% loss. As has been the case all year the US Dow remains the only bourse in the Index that is not showing a double digit loss for the year or better put it remains the best of the worst. In the very short term with the US dollar in retreat and Europe and US equity futures now higher the externals are a positive for oil prices at the moment. That said the underlying trend still remains bearish.
The API data showed across the board declines in inventories versus most projections calling for an across the board build...including my projections. The API reported a large draw in crude oil inventories of about 3.1 million barrels... even with only a modest decline in imports and a 1% decline in refinery run rates. The API reported a significant draw in gasoline and a surprise draw in distillate fuel as refinery utilization rates decreased by 1.0% or more than the expectations.
The market was expecting a modest build in crude oil stocks and a smaller build in gasoline and distillate fuel inventories this week. The report is overall bullish and it has resulted in some light buying coming into the market since the data was released late yesterday afternoon. The API reported a draw of about 3.1 million barrels of crude oil with a 0.9 million barrel decline in Cushing and a draw of 0.5 million barrels in PADD 2 which is a negative for the Brent/WTI spread which continues to slowly retrace today. The bulk of the draw was in PADD 3 or the Gulf region showing a decline of about 5 million barrels. On the week gasoline stocks decreased by about 5.0 million barrels while distillate fuel stocks drew by about 2.0 million barrels.