With more oil looking for slowly growing demand slots and with many of the major producers like Saudi Arabia vying to maintain market share this could signal that the role of OPEC going forward may be very different than the role it has played for the last thirty years. In fact I believe that there is a modest chance that OPEC as a group simply fades into the sunset with each country on their own to find the optimum markets for their specific grades of oil. The next several months will be very telling as to how free a market oil turns out to be and whether or not price will be the sole leader/market balancer of the global oil market rather than a group like OPEC.
Global equities were mixed with the EMI Global Equity Index about unchanged over the last twenty four hours. The year to date gain for the Index remained at 0.01% with the United States moving back into negative territory for 2015. Europe remains at the top of the leader board supported by the European Central Bank quantitative easing program. China is also in the top three as stimulus program are also supporting this market. Overall global equities were a neutral for the oil complex over the last twenty four hours.
Tuesday's API report was mixed and marginally bearish after another strong build in crude oil inventories but offset by a decline in gasoline while distillate fuel was basically unchanged on the week. Crude oil inventories increased strongly and came in at the high end of the market expectations along with a larger than expected draw in gasoline.
Crude oil imports increased for the third week in a row. Imports increased by 149,000 bpd. Total inventories of crude oil and refined products combined were modestly higher on the week.
The oil complex is mixed since the inventory release on late Tuesday afternoon and heading into Wednesday’s EIA oil inventory report to be released at 10:30 AM EST today.
The API reported Cushing, Okla., crude oil stocks built more than the year to date weekly average by 2.6 million barrels for the week. The API and EIA have been very much in sync on Cushing crude oil stocks and as such we should see a similar build in Cushing in the EIA report. Directionally it is bullish for the Brent/WTI spread. The build in Cushing stocks is most likely due to the positive economics for storage trades. With ample surplus storage capacity in Cushing traders are continuing to initiate storage trades in that location.