Oil Gets Back Below The $41 LevelOil failed to settle above the resistance at $41.50 and gained significant downside momentum.
Oil Video 21.10.20.
U.S. Crude Inventories Declined By 1 Million Barrels
Yesterday, API Crude Oil Stock Change report indicated that crude inventories increased by 0.58 million barrels. However, today’s EIA Weekly Petroleum Status Report showed that crude inventories decreased by 1 million barrels, suggesting tha the downside trend in inventory levels continued.
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While API Crude Oil Stock Change reports have a short-term impact on the market, EIA reports have more influence.
According to EIA, gasoline inventories increased by 1.9 million barrels while distillate fuel inventories decreased by 3.8 million barrels. Most likely, traders will be alarmed by the increase of gasoline inventories which suggests that gasoline demand recovery has stalled.
U.S. domestic oil production declined to 9.9 million barrels per day (bpd) as the negative impact from hurricanes persisted. It should be noted that crude inventories declined by just 1 million barrels while U.S. domestic oil production was down by 0.6 million bpd, so oil demand in the U.S. remained muted.
In total, this was not a bullish report despite the decrease in crude inventory levels. Gasoline inventories increased, and it looks like demand remains soft.
Oil Continues To Ignore The Recent Developments In Europe
While oil is losing ground today after an unsuccessful attempt to settle above the resistance at $41.50, it has managed to show material strength in recent days despite the alarming news from Europe.
Currently, European countries struggle to contain the second wave of coronavirus and are forced to introduce new restrictions.
The latest news on this front came from Czech Republic, where government decided to shut all non-essential shops and limit movements to essential trips in order to deal with the rising number of new cases.
Current data shows that countries like UK, France, Spain, Italy, Poland, Belgium and Netherlands have significant problems on the virus front, and the introduction of new anti-virus measures looks like a plausible scenario.
However, it remains to be seen whether oil traders will pay attention to the latest developments in Europe or focus on U.S. stimulus negotiations and the recent weakness of the U.S. dollar. A weak U.S. dollar is bullish for dollar-denominated commodities like oil and could provide some support to oil at a time when the future pace of demand recovery is under question.
For a look at all of today’s economic events, check out our economic calendar.