Oil Slides Below $40 As Crude Inventories Rise

Oil Video 07.10.20.

Crude Inventories Increase By 0.5 Million Barrels

Yesterday, API Crude Oil Stock Change report indicated that crude inventories increased by 0.95 million barrels. Today, EIA Weekly Status Report showed that inventories increased by 0.5 million barrels, confirming the uptick in inventory levels that was highlighted by the API report.

Crude oil imports increased by 0.6 million barrels per day (bpd) and served as the main catalyst for the increase in inventories.

Meanwhile, gasoline inventories decreased by 1.4 million bpd while distillate fuel inventories decreased by 1 million bpd.

U.S. domestic oil production has finally managed to increase from 10.7 million bpd to 11 million bpd. This would have been a concerning development for the bulls, but oil production will take a new hit from Hurricane Delta so traders will not have to worry about rising production in the near term.

In general, the report painted a rather positive picture. The increase in crude inventories was small while gasoline inventories and distillate fuel inventories trended down.

As I noted above, the market will not have to worry about a new uptrend in the U.S. oil production for some time. However, there are many factors that impact prices right now, so the inventory report may not be sufficient enough to provide an additional boost to oil.

Stimulus Drama And Hurricane Delta Boost Oil’s Volatility

In addition to the recent inventory report, oil traders try to make up their minds about the recent developments on the stimulus front and the potential impact of Hurricane Delta.

U.S. President Donald Trump put material pressure on the markets when he announced that coronavirus aid package negotiations with Democrats would stop.

Later, he signaled that he was ready to sign a smaller bill which included stimulus checks, some help for the airlines and funds for paycheck protection program.

Any stimulus program will serve as a bullish catalyst for the oil market as it will support the economy and consumer activity. That said, it is not clear whether any consensus on the new stimulus deal could be reached before the election in November.

Meanwhile, Hurricane Delta has already pushed more than 0.5 million bpd out of the market as offshore oil producers had to evacuate workers from platforms. This means that U.S. oil production will not be able to stay at the 11 million bpd level which is good for the oil market in the near term.

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