Crude prices are drifting lower ahead of this morning’s Energy Information Administration (EIA) oil inventory report after the API reported a modest draw in crude, but a significant build in distillate fuel. Although there has been a modest level of destocking of crude oil inventories in the United States during the last few months (about 27 million barrels since peaking second half of April) total combined stocks of crude oil and refined products have increased by about 30 million barrels. The U.S. crude oil balance continues to be oversupplied as total stocks of crude and refined products remain at a record high level.
Understandably, the market is unimpressed by the draw in crude offset by a distillate build that was twice as large as the crude oil draw. Oil prices are working their way toward a retest of the mid-March lows. I expect this will be accomplished, as there is currently no strong bullish support anywhere in the global oil complex with the sole exception that the market is in oversold territory. As such there may be a round or two of short covering over the next few weeks as the market attempts a test of the mid-March lows. The current and medium term market sentiment remains bearish.
Global equities recovered some of the losses experienced during the last month or so. During the last 24 hours the EMI Global equity index increased by 0.92 % with the year-to-date gain widening to 3.6%. There are still three of the 10 bourses in the Index in negative territory for the year with Canada holding the bottom spot in the Index. China rallied overnight gaining about 3.4 % and is still at the top of the leader board but by only a small margin. Global equities have been a negative price driver for the oil complex but were a tad more supportive over the last 24 hours.