Syria/Turkey dispute reverses crude trend

Long-term supply situation still bearish

Global equities have been on the defensive for the last twenty four hours as shown in the EMI Global Equity Table below. The only bourse that gained value over the last twenty four hours was China which had a minor gain in a global market that saw most all other bourses drifting lower. The EMI Index is now lower by 0.5% for the week resulting in the year to date gain narrowing to 6.5%. The rankings have remained the same with Germany still on top of the leader board with a year to date gain of 22.5% followed by Hong Kong and the US which are both still showing double digit gains for the year. Global equities have been a negative price driver for oil and the boarder commodity complex over the last day or so.

The weekly inventory cycle has been delayed by one day due to the Columbus Day holiday on Monday. The weekly oil inventory cycle will begin with the release of the API inventory report Wednesday afternoon and with the more widely followed EIA oil inventory report being released Thursday morning at 11:00 AM EST. With the global economy and oil fundamentals becoming more the focus of the trading and investing community this week's oil inventory report could be a price catalyst especially if the actual outcome shows a large deviation from the projections. However, any inventory reaction could be short lived if the macroeconomic data remains the main focus of most market players.

My projections for this week’s inventory report are summarized in the following table. I am expecting the US refining sector to hold relatively steady even as there have been a rash of refinery issues over the last several weeks. I am expecting a modest build in crude oil inventories, and a build in both gasoline and distillate fuel stocks. I am expecting crude oil stocks to increase by about 2 million barrels. If the actual numbers are in sync with my projections the year over year comparison for crude oil will now show a surplus of 29.1 million barrels while the overhang versus the five year average for the same week will come in around 35 million barrels.

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