Once again bearish news is hitting the crude oil complex and once again the market is hardly reacting to it. Reuters is reporting that some Canadian oil sands production restarted while the API reported yet another new all-time record high level of total combined inventories of crude oil and refined products.
Crude oil prices are drifting lower for the third trading session in a row after rising for the previous four weeks in a row. The market sentiment may be experiencing a change in the short term as the current fundamentals remain simply bearish. The upside momentum driven by the perception view than the market is already in a rebalancing pattern is slowing. The majority of the current bearish fundamental data hitting the media airwaves over the last week or so has pushed the perception view to the background for the near term.
WTI and Brent are now at the highest level of the year as even this week’s fundamental snapshot (basis API) was bullish. The battle of views continues with the view that the market is already in a rebalancing pattern continuing to dominate the narrative as well as the short-term direction of the market. Unless there is a more consistent pattern of bearish current fundamentals the upside rally is likely to continue.
Crude oil prices are retracing this morning after another build in U.S. crude oil stocks reported by the API late yesterday afternoon along with news that the Kuwait oil workers’ strike is over after three days. Kuwait production is going to ramp up quickly with Reuter’s reporting that production already increased by 500,000 bpd today with expectations that Kuwaiti production will reach the average March level in a few more days.
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.
There used to be a time when we would draw down crude in December. Well there also used to be a time when we saw a draw of crude when we ran refineries over 16M b/d. Alas, those days are behind us and this is the time of more.