Technical & Fundamental Oil Reports Specialists

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Fed has more influence over oil prices than the EIA

Published Thursday, April 28th, 2016

The EIA reported total US commercial stocks rose by more than 5 million bbls to 1.369 billion bbls in the latest week. With demand currently running at 19.83 mbpd this would cover 69 days of consumption. Including SPR this figure jumps to 104 days. Total commercial stocks are 10% above last year’s level and 17% higher than the 5-year average.

The picture is more or less the same on the crude front. Inventories jumped by 2 million bbls and at 541 million bbls are at their highest ever level. The figure is made even more bearish with the US West Coast drawing 1.4 million bbls. The 1.75 million bbl build at Cushing, Oklahoma, did nothing to help the WTI structure strengthen as the June/July spread closed 2 cents/bbl lower. Crude oil stocks at the NYMEX delivery point are only 1.4 million bbls below the all-time high. Nationwide crude oil stocks are also 10% higher than during the same week of 2015 and 23% above the 5-year average.

Despite the API showing a draw in gasoline inventories stocks in this product increased by 1.61 million bbls. One of the rare bullish elements of this week’s report is the 1.7 million bbl draw in distillate inventories. As constructive as this seems distillate stocks are still 23% above last year’s level and also the 5-year average. Weekly demand estimates did not help the bulls’ case as gasoline demand dropped 130,000 bpd, distillate demand by 154,000 bpd and total product demand by 400,000 bpd.

What provided support for oil bulls was the US central bank. A sharp drop in prices in the immediate aftermath of the EIA weekly stats on oil inventories was followed by a gradual recovery as the dollar weakened ahead of the Fed policy decision. It is discussed in detail below but the net result was WTI gaining $1.29/bbl and Brent $1.44/bbl. Heating Oil closed 470 points higher and RBOB 148 points up.

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Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.