Crude oil prices are back into rally mode after a surprise draw in U.S. crude oil stocks reported by the American Petroleum Institute (API) late yesterday afternoon. In addition the freeze deal is back circulating over the media airwaves with Kuwait indicating that there were positive indications that an agreement will be reached according to a Reuters report.
Since hitting a peak in prices on March 18 the spot WTI contract has shed about $4 per barrel as the market continues to trade in a battle between those who view the potential production freezing deal (if agreed) as a means to accelerate the global rebalancing of the oil market versus those who are focused on the reality that the global overhang is not going to clear for the foreseeable future.
Crude prices are mixed with crude oil and heating oil starting the trading session in negative territory while gasoline is positive on the day. The main driver in the overnight trading period and into this morning is the mixed inventory report released by the American Petroleum Institute late yesterday afternoon. They reported a huge build in crude oil stocks (but a draw in Cushing) with declines in refined product inventories.
Crude oil prices are recovering after a few days of weakness after a smaller than expected build in crude oil stocks reported by the API late yesterday evening. On the other hand, distillate and gasoline inventories declined less than projected. Overall I would categorize the API report as more near neutral but the market is once again embracing a data point that is not very bullish.
Global oil inventories are forecast to increase by an annual average of 1.6 million barrels per day in 2016 and by an additional 0.6 million b/d in 2017. These inventory builds are larger than previously expected, delaying the rebalancing of the oil market and contributing to lower forecast oil prices.
Crude oil prices are starting the U.S. trading session in positive territory after giving up some ground yesterday. Since the announcement of the potential production freezing deal oil prices are starting to stabilize with the week to date level just slightly below last week’s closing level as of this writing.
A surprise draw in crude oil reported by the API late yesterday afternoon sent the crude oil market into a mild round of short covering. The bearishness of the non-event OPEC meeting last Friday is starting to wind down as market participants start to turn their attention to 2016 and beyond and the start of the monthly oil forecasts with the EIA Short Term Energy Outlook (STEO) report first to hit the media airwaves yesterday afternoon.
Crude oil prices are strongly higher on Tuesday after a modest rally on Monday. The market rallied above the breakout level from the sideways choppy trading pattern that has been in play for several weeks.