Oil Rebounds As Crude Inventories DeclineOil gained strong upside momentum and is trying to settle above the $48 level.
Oil Video 23.12.20.
Crude Inventories Decline By 0.6 Million Barrels
EIA has just released its Weekly Petroleum Status Report which indicated that crude inventories declined by 0.6 million barrels. Yesterday, API Crude Oil Stock Change report estimated that crude inventories increased by 2.7 million barrels, but the market traditionally trusts EIA data. I’d note that API and EIA data differed significantly in recent weeks.
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According to EIA, gasoline inventories decreased by 1.1 million barrels while distillate fuel inventories decreased by 2.3 million barrels.
Crude oil imports increased by 140,000 barrels per day (bpd), so crude inventories declined despite the increase in imports. Interestingly, U.S. domestic oil production remained flat at 11 million bpd. U.S. domestic oil production failed to grow despite the recent increase in the number of U.S. oil rigs.
Earlier, EIA estimated that U.S. domestic oil production will not be able to grow significantly from the 11 million bpd level. Currently, the U.S. oil production has settled at this level but it remains to be seen whether it will remain unchanged if oil gets to the $50 level.
In general, it was a bullish report from EIA as inventories decreased while domestic production remained flat at 11 million bpd. Not surprisingly, oil gained additional upside momentum after the release of this report.
Positive Brexit News Provide Additional Support To Oil
According to recent reports, EU and UK are very close to the trade deal and could sign it as early as this evening.
A no-deal Brexit will disrupt trade and bring additional uncertainty at a time when Europe has to deal with a new, more infectious strain of coronavirus so good news on this front are positive for markets.
Current reports rely on sources so oil may get an additional boost if this information is confirmed officially.
It should be noted that oil may be more volatile in holiday-thinned trading. That said, oil managed to quickly get back to the upside mode after the blow delivered by the new COVID-19 strain which shows that the market is still in a bullish mode.
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