Oil Tests Resistance At $42.50 As Inventories Continue To DeclineOil gains ground as crude inventories decrease by 4.5 million barrels.
Oil Video 12.08.20.
Crude Inventories Decline by 4.5 Million Barrels
EIA has just published its Weekly Petroleum Status Report which showed that crude oil inventories declined by 4.5 million barrels.
This data was in line with yesterday’s API Crude Oil Stock Change report which indicated that crude inventories fell by 4.4 million barrels.
Crude oil imports declined by about 0.4 million barrels per day (bpd) and played a material role in the crude inventory draw.
Meanwhile, gasoline inventories decreased by 0.7 million barrels while distillate fuel inventories decreased by 2.3 million barrels.
Importantly, the U.S. domestic oil production remained in a downside trend and declined from 11 million bpd to 10.7 million bpd.
Previously, U.S. oil production tried to rebound after the blow dealt by the coronavirus pandemic but did not manage to get above 11.1 million bpd.
This is a very good sign for the market since many traders were worried that WTI oil prices above $40 would lead to a material rebound in U.S. oil production. This is not happening. On the contrary, the U.S. oil production is once again under pressure which is bullish for oil.
OPEC Revises Its Oil Demand Outlook
Today, OPEC released its Monthly Oil Market Report which indicated that OPEC decided to revise its estimate of global oil demand growth from -8.9 million bpd to -9.1 million bpd.
OPEC stated that lower economic activity levels in certain non-OECD countries were the main reason for the revision. Brazil and India have so far failed to contain the pandemic so it looks like OPEC expects that problems with coronavirus in these countries will hurt demand for oil.
For this year, OPEC expects oil demand of 90.6 million bpd. In the next year, oil demand is set to increase to 97.6 million bpd.
Interestingly, OPEC expects that non-OPEC supply may grow in the third quarter. Specifically, OPEC noted that U.S. shale oil producers showed signs of restarting output.
The above-mentioned EIA Weekly Petroleum Status Report painted a completely different picture as it highlighted a material decline in U.S. oil production.
For now, oil traders will likely focus on the continued decline in inventory levels. Oil remains in an upside trend, but more positive news about COVID-19 vaccine may be required to push oil to new highs.
For a look at all of today’s economic events, check out our economic calendar.