After a short lived round of profit taking selling on Monday, the energy market has regained its upside momentum since Tuesday’s trading session and is strongly higher in the early U.S. trading session. Late yesterday afternoon the API reported a surprise draw in total U.S. crude oil stocks, which was enough for the perception crowd to regain their footing and begin yet another buying spree.
WTI and Brent are now at the highest level of the year as even this week’s fundamental snapshot (basis API) was bullish. Later this morning the more widely followed EIA report will be issued and if it is in agreement with the API data it could push prices even higher today.
The battle of views continues with the view that the market is already in a rebalancing pattern continuing to dominate the narrative as well as the short-term direction of the market. Unless there is a more consistent pattern of bearish current fundamentals, the upside rally is likely to continue.
Also supporting the upside move in oil this week is the support for oil and the broader commodity complex coming from the declining U.S. dollar. Based on the way the U.S. dollar has been trading this week the market seems to be expecting a bearish outcome from this week’s U.S. Fed FOMC meeting announcement later today. With weaker economic data of late it suggests that the Fed may not raise short-term interest rates in the short to even medium term.
Global equities recovered what they lost yesterday during the last 24 hours with the EMI Global Equity Index increasing by 0.74%. The year-to-date gain has widened to 5.1% and is still in negative territory for the week to date. Four of the 10 bourses in the Index remain in positive territory with Brazil still on top of the leader board and China holding the bottom spot. Global equities were a positive price directional driver for the oil complex during the last 24 hours while the lower U.S. dollar is acting as an offset to the falling equities insofar as the oil price direction is concerned.
The API released its data late Wednesday afternoon reporting a draw in total U.S. crude oil stocks with a modest build in Cushing. They also reported draw in distillate fuel inventories and a draw in gasoline stocks that was within the expectations. U.S. crude oil stocks decreased by 1.1 million barrels with Cushing inventories decreasing by about 1.9 million barrels on the week. They also reported a 1 million barrel draw in distillate fuel and a 0.4 million barrel draw in gasoline stocks. Total combined inventories of crude oil and refined products were lower for the second week in a row.