Oil weakness continues after inventory builds

Global equities are still lower for the week as shown in the EMI Global Equity Index table below. The Index is lower by 1.6% for the week resulting in the year to date loss widening to 1.8%. So far the Index has mostly been in negative territory for the year since the middle of May and currently about 17% off of its year to date high made back in the middle of March. Five bourses remain in negative territory with Canada still holding the bottom spot in the Index as oil prices are still down over 30% since peaking earlier his year. Germany and  Hong Kong are holding the top two spots in the Index with Germany's market getting a boost from the lower euro which is favorable for Germany's export oriented economy. Global equities have been a negative price driver for oil and the broader commodity complex.

The API report showed a small build in crude oil versus an expectation for a larger build and a surprise draw in distillate stocks along with a build in gasoline inventories but below the expectations. The API reported a build (of about 0.5 million barrels) in crude oil stocks and outside the expectation range as crude oil imports decreased while refinery run rates increased by 0.8%. The API reported a modest build in gasoline stocks. They also reported a surprise draw in distillate stocks versus an expectation for a more seasonal build in distillate fuel inventories.

The report is bullish for distillate, neutral for crude oil and for gasoline. The market has not reacted strongly in overnight trading but has been stabilizing for all commodities in the complex ahead of the EU meeting starting tomorrow.  The market is always cautious on trading on the API report and prefers to wait for the more widely watched EIA report due out this morning at 10:30 AM. The API reported a build of about 0.5 million barrels of crude oil with a draw of 1.4 million barrels in PADD 2 and a decline of 0.682 million barrels in Cushing, Ok which is bearish for the Brent/WTI spread. On the week gasoline stocks increased by about 0.4 million barrels while distillate fuel stocks decreased by about 1.0 million barrels. 

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