Oil extends gains after large inventory draw

Summary:

  • Crude oil inventories: -9.5M vs -1.9M exp. -1.1M prior

  • Comparable drop to last night’s API reading

  • Oil (+2.3%) jumps above $60 in initial response 

 

The weekly government oil inventory data from the US has shown a large decline, boosting the crude markets that were already firmly higher on the day further. A print of -9.5M means that there have now been 4 consecutive draw downs with 2 of the last 3 in the vicinity of the -10M mark. Against a consensus forecast of -1.9M and a prior reading of -1.1M this afternoon’s data looks like a large downside surprise and even though it appears as less of a shock compared to last night’s API print of -8.2M it is still no doubt a sizable drop.

Recent declines in the level of US stockpiles have seen the inventory figure pull back from near its highest level of the past 5 years towards the average. Source: Bloomberg

 

Components of the report were as follows:

  • Gasoline: -1.5M vs -2.0M exp

  • Cushing: -0.3M vs +0.7M prior

  • Distillates: +3.7M vs +0.8M exp

 

Looking at the components of the release the picture is not quite so supportive of price with a large build in distillates in particular taking the edge off the headline number. The initial reaction was clearly positive for the crude markets with both Oil and Oil.WTI rallying up to their highest levels of the day. However, since then there’s been a bit of indecision and the market has pulled back a little from the highs despite remaining above the $66 mark. 

Oil jumped in the immediate reaction to the data but has failed to make a sustained push higher with price still hovering around the 66.00 mark. Source: xStation

 

D1

On a daily chart the market has extended back up near recent swing highs around 66.70 and this level could be seen as potential resistance. Potential support at 64.50. Source: xStation 

 

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