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 drifting lower after another bearish data point late yesterday afternoon. The API data showed across the board builds in inventories versus a market expectation for a draw in crude oil. Heading into the Dec. 4 OPEC meeting oil prices are near the lowest level they have traded at since the downturn began in June of 2014.
Fed Chair Janet Yellen piled onto the crude oil market after telling Congress that a December rate hike was a, "Live possibility!" Live--it’s a December rate hike! Maybe Yellen instead of Donald Trump should be on Saturday Night Live because she seems to get a major reaction to saying "live"!
So far for the week the spot WI contract is still lower by about $0.65/bbl while the spot Brent contract is lower by about $0.50/bbl. The market continues to trade in a choppy sideways pattern with the bias slightly to the downside. Today’s EIA inventory report will likely be a market mover if the data is in sync with bearish API data.
A large draw in total U.S. crude oil stocks reported by the API late yesterday has resulted in a light round of short covering in a market that remains oversold. As of this morning the crude oil market is still in positive territory but well off of the overnight highs hit after the API data release as the industry awaits the more widely followed EIA oil inventory snapshot.
The day after crude oil prices rose almost 5% the dogma of the dollar versus oil inverse relationship has come to a screeching halt ahead of the most exciting FOMC meetings in a decade. As the Fed moves closer to raising interest rates and getting closer to a normalization of interest rate policy the correlation between the dollar and oil is breaking down.
U.S. crude oil production may be falling faster than many had thought and we are seeing signs of that in Cushing, Okla. Cushing is the Nymex delivery point and a storage facility that if you listened to the Ultra Bears was supposed to be overflowing with oil. Instead the opposite is happening as supply there have fallen five out of the last seven weeks and is slated to fall once again.