Oil Mixed After API Report Shows That Crude Inventories IncreasedOil swings between gains and losses while traders wait for EIA Weekly Petroleum Status Report which will be published on Friday.
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If API data is confirmed by EIA Weekly Petroleum Status Report which is scheduled to be published on Friday, it will be the first increase in crude inventory levels since early December.
It should be noted that the report has put some pressure on oil which has recently made an attempt to settle above multi-month highs at $53.90. However, traders will likely wait for the EIA report before making any big moves.
If EIA report confirms API data, it will signal that demand remains soft due to the negative impact of the second wave of the virus. The market is optimistic on Biden’s huge stimulus plan which includes $1,400 stimulus checks, but it remains to be seen whether the implementation of this plan will lead to a robust increase in domestic oil demand in the near term.
Will U.S. Production Increase From 11 Million Barrels Per Day?
One of the biggest intrigues of the upcoming EIA report is whether U.S. oil production has finally managed to grow from the 11 million barrels per day (bpd) level.
The surprising increase in crude inventory levels (if confirmed by EIA) may signal that domestic oil production has finally started to grow. The recent Baker Hughes Rig Count reports showed a steady increase in the number of rigs drilling for oil, so the potential growth of domestic oil production will not be surprising.
A combination of rising inventory levels and growing domestic production may hurt the current rally, although it remains to be seen whether these potential negative catalysts will be able to offset the current stimulus optimism which continues to push oil higher.
If EIA Weekly Petroleum Status Report shows that U.S. domestic oil production remained at 11 million bpd despite higher oil prices, WTI oil will have a good chance to get closer to the $55 level.
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