Oil Falls After Shocking Increase In Crude Inventories

Oil Video 09.12.20.

Crude Inventories Increase By 15.2 Million Barrels

Yesterday, the API Crude Oil Stock Change report indicated that crude inventories increased by 1.14 million barrels while analysts expected that they would fall by 1.5 million barrels. While the report was worse than expected, it did not put any material pressure on the oil market.

Today, EIA released its Weekly Petroleum Status Report which is the preferred source for traders who are looking for data on U.S. inventory levels.

The EIA report is truly shocking as it indicates that crude inventories increased by as much as 15.2 million barrels! Gasoline inventories increased by 4.2 million barrels while distillate fuel inventories increased by 5.2 million barrels.

Interestingly, U.S. domestic oil production remained unchanged at 11.1 million barrels per day (bpd). Many traders feared that U.S. production will start to increase together with the price of oil but it remains close to the 11 million bpd level.

The huge increase in crude inventories could be partially explained by the significant increase in crude oil imports, which grew by 1.1 million bpd and reached 6.5 million bpd. At the same time, it is clear that a big part of this increase is due to softer demand.

European Countries May Have To Extend Their Anti-Virus Measures

At this point, the main question is whether oil traders are bullish enough to ignore the shocking inventory report. Currently, oil is moving lower which is not surprising after such a report. However, oil needs to settle below the $45 level to have a chance to develop upside momentum.

Currently, oil is supported by vaccine optimism and hopes for a new round of U.S. economic stimulus. Meanwhile, the near-term fundamental situation remains challenging.

In Europe, countries experience significant problems as the virus remains strong. Germany’s Angela Merkel is pushing for a stronger lockdown after Christmas as she does not believe that vaccination will make any material difference in the first quarter of 2021.

France has recently stated that it may delay relaxing some anti-virus measures in order to avoid the third wave of the virus. If the situation in Europe continues to deteriorate and EU members are forced to keep serious anti-virus measures for the first months of the next year, oil may find itself under material pressure.

For a look at all of today’s economic events, check out our economic calendar.