Today OPEC meets in Vienna and all signs point to OPEC keeping production pretty much at current levels and as I mentioned last week simply making an adjustment in the official ceiling to 30 million barrels per day (which is what they are producing right now). So no cut, no increase and thus it looks like the meeting will be a non-event. It is not clear as to how the market will ultimately digest the outcome especially with the evolving situation in Iran .
The API data showed across the board builds. The API reported a small build in crude oil stocks versus an expectation for a modest decline in crude oil inventories of about 0.5 million barrels as crude oil imports increased and refinery run rates also decreased by 1.4%. The API reported basically no change in gasoline stocks versus projections for a modest build and an expected build in distillate fuel inventories.
The market was expecting a modest draw in crude oil stocks and a modest build in gasoline and distillate fuel inventories this week. The report is somewhat bearish for the entire complex. That said the report has resulted in selling in the market overnight. The market remains hostage to the evolving situation in Europe that has been unfolding once again this week as discussed above with inventory data a secondary driver. The API reported a build of about 0.5 million barrels of crude oil with a 0.1 million barrel build in Cushing and a build of about 1 million barrels in PADD 2 which is bullish for the Brent/WTI spread which has been somewhat range bound since the middle of November. On the week gasoline stocks were about unchanged while distillate fuel stocks built by about 1.2 million barrels. The more widely watched EIA data will be released this morning. Whether or not the market will react to anything that comes out of the EIA this morning will be dependent on what revolves around Europe today.
Oil remains mostly coupled to the direction of the USD and the euro and will remain in this pattern for the foreseeable future or until Europe moves into the background. As such I am not sure many market participants are going to pay much attention to this week's round of oil inventory data as Europe and the US are still in the midst of uncertainty suggesting that this week's oil inventory reports may not have a major impact on price direction. At the moment all market participants are continuing to follow the tick by tick direction of equities and the US dollar (driven by Europe)... as they are both the primary price drivers for oil. Even with the fundamentals and geopolitics starting to impact price it is the macro trade that dominates at the moment. As such this week's oil inventory report could remain a secondary price driver at best and only impact price direction if the actual EIA data is noticeably outside of the range of market expectations for the report.
My projections for this week’s inventory reports are summarized in the following table. I am expecting a mixed report with a modest increase in refinery utilization rates which should result in a neutral weekly fundamental snapshot. I am expecting a modest draw in crude oil stocks with an increase in refinery utilization rates. I am expecting a modest build in gasoline inventories and another build in distillate fuel stocks. I am expecting crude oil stocks to decrease by about 1.9 million barrels. If the actual numbers are in sync with my projections the year over year deficit of crude oil will narrow to about 11.8 million barrels while the overhang versus the five year average for the same week will come in around 7.8 million barrels.