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Commodity Focus: Crude Oil

By:
Ole Hansen
Published: Oct 30, 2019, 15:43 UTC

In today's commodity focus we take a closer look at crude oil which trades unchanged on the day and close to its five-month average ahead of the weekly US storage report at 1430 GMT

Commodity Focus: Crude Oil

WTI crude oil trades close to its five-month average at $55.50/b ahead of the ‘Weekly Petroleum Status Report’ from the U.S. Energy Information Administration at 1430 GMT. An hour earlier in Europe than normal after the clocks were changed at the weekend. The range bound behavior these past few months highlights the uncertainty in a market where slowing demand growth is being off-set by the potential for additional production cuts from the OPEC+ group of producers.

Despite the struggle to find fresh momentum hedge funds did return as net-buyers of Brent and WTI crude oil for the first time since mid-September last week. However, the skepticism about oil’s ability to break higher was highlighted by the gross-short which rose to the highest since January. Overall the combine net-long in WTI and Brent rose by 13k to 302k lots, this following a 52k lots reduction during the previous four weeks.

Focus ahead of today’s inventory report has been the potential price supportive drop in crude stocks. This after the American Petroleum Institute (API) last night reported a 1.7 million barrel drop in crude stocks. A drop would be counter to the seasonal trend for this time of year where a slowdown in refinery demand leaves more crude oil unused.

The answer to a potential drop in crude stocks may be explained by the continued rise in U.S. exports which reached a near record 3.7 million barrels/day in the previous week. Countering the positive impact of an overall reduction in crude stocks is the expectations for a fifth consecutive rise in stocks at Cushing, Oklahoma, the delivery hub for WTI crude oil futures traded in New York. 

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire.

About the Author

Ole Hansencontributor

Ole Hansen joined Saxo Bank in 2008 and has been Head of Commodity Strategy since 2010.

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