Crude Inventories Fall Again
Crude oil prices have seen a drop in buying this week. Price moved into negative territory on Wednesday despite the latest data from the Energy Information Administration.
In the week ending August 28th, the EIA reported that US crude inventories declined by a further 9.4 million barrels over the week. This latest decrease far outstripped market expectations of a 1.2 million barrel decline.
It also marks the sixth such weekly decline in a row, taking total inventories back down to 498.4 million barrels.
US crude inventories are still sitting around 14% higher than the seasonal five-year average. However, they have declined significantly since the middle of July when they were at record highs.
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Gasoline & Distillates Lower Also
US gasoline stores were also lower by 4.3 million barrels over the week. They are now just 4% higher than their five-year seasonal average.
Distillate stockpiles, too, were lower over the week. They fell by 1.7 million barrels, though remain around 23% higher than their five-year seasonal average.
The data noted that US crude oil imports averaged 4.9 million barrels per day over the week. This marked a decline of 1 million barrels per day on the prior week.
Looking back over the last four weeks, US crude oil imports averaged 5.5 million barrels per day. This is around 20% less than the same four-week period a year prior.
Demand Still Weak
In terms of demand, the total products supplied category (used as a proxy for gauging fuel demand) averaged 18.3 million barrels a day over the last four weeks.
This is roughly a 16% contraction from the same four-week period a year prior.
Over the same horizon, motor gasoline products supplied averaged 8.9 million barrels per day. This marked an 8.9% contraction on the same period a year prior.
Distillate fuel products supplied were also down around 5% on the year at 3.7 million barrels per day.
USD Rally Weighing on Oil
The decline in oil prices this week, which comes despite equities breaking out to fresh highs, is mostly attributable to the strong rally in the dollar midweek.
USD traded firmly higher on Wednesday in response to the latest ADP employment data.
Despite missing expectations at 428k jobs, the reading was at least a firm improvement on the prior week’s 212k. It suggests that the Non-Farm Payrolls on Friday will come in at least in line with expectations.
Crude Prices Reverse Under Support Level
Price action in crude oil has become increasingly frustrating recently. Price has slowly drifted higher following the initial rally into June highs. However, the move has been a subdued one and volatility has all but vanished.
The sell-off this week has seen price moving back below the 42.43 level. However, it remains above the 61.8% retracement from year to date highs for now.
If price breaks back below here, we could see a deeper move, backed up by the bearish divergence seen on the RSI indicator.