Crude still looking for signs of rebalancing

June 24, 2015 10:29 AM
Weekly Energy Markets Analysis

Crude oil prices are firm ahead of this morning’s Energy Information Administration (EIA) oil inventory report adding to yesterday’s gains and after a larger than expected draw reported in total crude oil stocks by the American Petroleum Institute (API) late yesterday afternoon. The API reported a 3.2 million barrel draw in crude oil along with a 0.8 million barrel draw in distillate. They also reported a 2 million barrel draw in Cushing, Okla., and a build in gasoline. With the forward curve contango still not wide enough to economically support new storage trades oil is slowly moving out of storage to meet the current summer refiner demand for crude oil.

Both WTI and Brent remain in a wide trading range since the middle of April. The WTI contract is bounded by about $62 per barrel on the upper resistance end and $58 per barrell on the support side. The market is still looking for strong signs that the market is in the process of rebalancing. So far the only sign has been a steady destocking of crude oil inventories in the United States for the last two months as refiner demand remains robust heading into the summer driving season.

On the other hand total combined crude oil and refined product inventories have been steadily building and as shown in the following chart are still at record high levels. At the moment the surplus of oil in the United States is still growing even as crude oil stocks are declining. The crude oil being moved out of inventories is simply being refined with a major portion of the refined products heading into inventory. Oil by any other name is still oil and is still oversupplied.

Page 1 of 4
About the Author

Energy Market Analysis is published daily by the Energy Management Institute 1324 Lexington Avenue, # 322, New York, NY 10128. Copyright 2008. Reproduction without permission is strictly prohibited. Subscriptions: $129 for annual orders. Editor in Chief: Dominick Chirichella, Publisher: Stephen Gloyd, Editor Sal Umek.