Shifting inventories scare away the bears

May 6, 2015 08:55 AM

API data released yesterday afternoon showed a draw in crude oil inventories to the tune of -1.5 million barrels. This is the first draw reported in WTI crude in recent memory and would seem to indicate that lower pricing has had a contracting effect on the U.S. oil industry. Continued strong demand should produce further upside pressure as the front contract attempts to test the $65 barrier. 

The market should continue to focus on the supply side with the EIA data due out at 9:30 am CST. If the EIA report shows a similar decline in inventories then it would seem likely for the WTI contract to add to its already nearly 2 dollar gains. 

Other fundamentals such as the war in Yemen, continued central bank easy money encouraging demand and reduced rig counts remain central to the current rally. With the supply side landscape continuing to shift into neutral, if not bullish, territory, there is very little bearish information out there currently. 

Chairperson Yellen will be speaking this morning though it is unclear whether or not she will be directly discussing monetary policy.  If she does, however, it could have an effect across the commodity landscape, particularly if she were to deliver any hawkish sentiments. 

Today’s soft ADP report could begin to price in a soft Friday Jobs report though the correlation between ADP and the headline monthly U.S. figure is tentative at best. Continue to view, for the time being, bad news as good when considering demand for energies as well the broader based indices. 

About the Author

Tory Enerson is a senior market strategist with the Zaner Group in Chicago, an Independent Introducing Broker. He has been in the futures industry for over 20 years. Beginning his career at the CBOT in 1990, Enerson worked his way up through the industry when he became a member of the CBOT in 1998 and traded for over a decade before beginning to work with clients as a market strategist.