Global equities were hit with a strong round of selling over the last twenty four hours as the Portuguese coalition government looks to be on the brink of collapse. Just when everyone thought the EU was out of the woods up pops Portugal and a reminder that the sovereign debt issues in the region are not fully in the background. The EMI Index has declined by 2 percent for the week with the year to date loss now sitting at the highest level of the year at 8.9 percent. The last time the EMI Index was trading at the current level was almost one year ago in early July of 2012. Needless to say the global equity markets are currently a negative price driver for the oil complex… although oil is currently beating to a different drum as discussed above.
Wednesday's API report was simply bullish with across the board draws in inventories. Total crude oil stocks decreased by a much greater than expected 9.4 million barrels as crude oil imports decreased strongly while refinery run rates increased by 0.3 percent. The API reported a surprise draw in both distillate fuel inventories and in gasoline stocks.
The entire oil complex is higher as of this writing and heading into the EIA oil inventory report to be released at 10:30 AM EST today. The market is usually cautious on trading on the API report and prefers to wait for the more widely watched EIA report due out this morning. On the week gasoline stocks decreased by about 0.2 million barrels while distillate fuel stocks decreased by about 2.3 million barrels.
The API reported Cushing crude oil stocks increased by 0.400 million barrels. The API and EIA have been very much in sync on Cushing crude oil stocks and as such we should see a similar draw in Cushing in the EIA report. Directionally it is bullish for the spread. However, as discussed above the spread is continuing to narrow.
My projections for this week’s inventory report are summarized in the above table. I am expecting a modest draw in crude oil inventories, and builds in both distillate fuel and gasoline stocks.