It was an active night for global markets, including a terror attack in Iran, the takeover of Banco Popular in Spain--not to mention the American Petroleum Institute Report that showed a big drop in crude supply but big increases in gasoline and distillates.
While it was expected that political risk would continue driving sentiment this week with the UK Election just days away, nobody saw it coming that the main story at the beginning of the week would be the unexpected news that a Saudi-led alliance would cut all diplomatic ties with Qatar.
The Energy Information Administration failed to wow the crude oil market even after it reported the biggest crude oil drawdown of the year. The reason is a technical weakness on the charts, coupled with the promise of more Libyan oil production and the fact that U.S. oil production increase tied the highest level since November of 2015. Not even President Trump’s withdrawal from the Paris Climate Accord could give the market the lift it needed.
If you look at data from the American Petroleum Institute (API) you will see that it is obvious that OPEC/non-OPEC production cuts are starting to have an impact on U.S. oil inventory. The API not only reported a whopping 8.67-million-barrel drawdown in oil inventory last week, they also reported that during the last five weeks there has been a drop of over 19.277 million barrels.
The Summer driving season is off and running and oil is struggling to find direction. While we start to move into a period that could see substantial draws in inventory, the trade is focused on shale and what they view as near-term oversupply. Still, disappointed that Organization of the Petroleum Exporting Countries (OPEC) failed to extend production cuts or even enhance them, we are now in a waiting game to see how fast supply starts to dwindle.