A much larger than expected decline in crude oil as reported by the API last night coupled with the growing unrest in Egypt has pushed the spot WTI price back above the $100/bbl level for first time since September 2012.
The overall fundamental picture has not changed this week with oil stocks in the U.S. at the highest level in more than 25 years. Simply put, oil is well supplied with supply still outstripping demand.
Oil bulls were living in a Fed paradise. Somehow up until the Fed meeting the market must have believed that Fed Chairman Ben Bernanke wasn't serious about that taper thing, but they found out that he was serious, very serious.
Oil prices have continued to move higher in anticipation of a friendly outcome to today’s U.S. FOMC meeting. The market has been trading this week on a view that the Fed will remain status quo on its QE.
Oil prices are steady as we await confirmation from the EIA of a massive build in supplies. The IEA also just released their monthly oil market assessment and also lowered global oil consumption slightly for 2013.
Oil supply plunged last week by a whopping 6.3 million barrels last week. That drop was dramatic but we still are ending the month of May with supplies at a 10-year high -- as opposed to the 81-year high last week.
Fed Chairman Ben Bernanke does his best impression of a one-handed economist. But while the market focuses of the possibility of softening demand because of the Fed and China there was one area where demand actually improved...
So the battle between a weakening oil demand picture versus the support coming from the very accommodative monetary policies in the developed world economies continues with the winning side flip flopping back and forth.