Corona Virus
Stay Safe, FollowGuidance
Fetching Location Data…
Vladimir Zernov
Crude Oil

Oil Video 08.07.20.


Crude Oil Inventories Unexpectedly Increase

Yesterday, API Crude Oil Stock Change report indicated that crude oil inventories increased by 2.05 million barrels.

Today, EIA Weekly Petroleum Status report showed that inventories experienced a bigger increase of 5.7 million barrels. Meanwhile, gasoline inventories decreased by 4.8 million barrels while distillate fuel inventories increased by 3.1 million barrels. This is not something you’d expect to see during the driving season.

The U.S. domestic oil production remained flat at 11 million barrels per day (bpd) which shows that the U.S. oil industry has found some balance at current prices near $40 per barrel.

The main reason for the increase in crude inventories was the increase in imports. According to EIA, imports jumped by 1.4 million bpd to 7.4 million bpd. It looks like some oil which was previously stored on tankers is finding its way to the market as the spread between the front-month contract and longer-dated contracts has almost disappeared.

In my opinion, this is not a bullish report. Crude inventories continue to increase while U.S. domestic production has stabilized at 11 million bpd. The main hope of oil bulls right now is the continued optimism of the global markets.

EIA Increases Its Oil Price Forecast For The Second Half Of 2020

In its Short-Term Energy Outlook, EIA indicated that it had changed its price forecast for both Brent and WTI.

EIA expects that Brent spot prices will average $41 per barrel at the second half of this year and climb to $50 per barrel in 2021. The forecast for the second half of 2020 is higher than the previous one by $4 per barrel, while the forecast for 2021 exceeds the previous forecast by $2 per barrel.

Meanwhile, EIA believes that WTI prices will not be able to average $50 per barrel in 2021 and expects that U.S. oil production will stay at 11 million bpd in 2021.

EIA notes that high inventory levels will limit price gains but expects that inventory levels will decline in the second half of 2020 and through 2021. As we have just seen in the Weekly Petroleum Status Report, this process has not yet begun.

The main risk for oil prices right now is the return of serious virus containment measures. Australia’s Melbourne has entered its second lockdown, Serbia wants to impose a curfew, while Central Asian countries like Kazakhstan and Uzbekistan are reversing their reopenings.

The oil market may not pay attention to these developments right now because they do not include oil’s biggest consumers but the trend is alarming and should be closely monitored by oil traders.

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

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.