After a mixed performance on Tuesday the crude oil complex is higher across the board after a larger than expected draw reported in total crude oil stocks by the API late yesterday afternoon. The API reported a 2.9 million bbl draw in crude oil along with a 2.9 million bbl draw in gasoline. They also reported a 0.3 million barrel build in Cushing, OKla., and a build in distillate fuel. With the forward curve contango still not wide enough to economically support new storage trades oil is slowly moving out of storage to meet the current summer refiner demand for crude oil.
The August Brent/WTI spread is widening modestly this morning but did slip into a new lower technical trading range yesterday. The new trading range is bounded by $2.50 per barrel on the support side and $4/bbl on the resistance end. The spread has been narrowing consistently since peaking back in early May. With U.S. crude oil stocks in a destocking mode for the last two months and with the surplus of crude oil spreading to the international markets… like West African the Brent contract has been under pressure especially relative to WTI.
Further supporting the oil complex is the declining U.S. dollar. The U.S. dollar is lower this morning after gaining ground for the previous four trading sessions. Today the US Federal Reserve will announce the outcome of their latest FOMC meeting. The market consensus is expecting the Fed to hold rates steady at this meeting and not raise short term interest rates just yet. That said any indication of the Fed embarking on a change in monetary policy sooner than later is likely to then push the U.S. dollar higher and thus put pressure on oil prices.
Global equities were higher over the last twenty four hours but mostly driven by the Asian and Brazilian markets while Europe remains on the defensive this morning on concerns over Greece. The EMI Global Equity Index increased by 0.54% over the last twenty four hours with year to date return widening to 8.9%. Global equities were a positive directional price driver for the oil complex over the last twenty four hours.