Crude Oil Prices Chop in Response to EIA Data

Crude oil traders posted a two-sided reaction to today’s government report which showed a large rise in U.S. crude inventories. The freshly reported increase in supply occurred even with OPEC reporting record compliance with its plan to shed inventory.

International Brent crude was trading at $55.79 shortly after the news was released, down 18 cents. U.S. West Texas Intermediate crude fell 10 cents to $53.10.

According to the U.S. Energy Information Administration (EIA), U.S. inventories rose more than the expected 9.5 million barrels during the week-ended February 10 to a total of 518.1 million barrels. The figure was in line with yesterday’s American Petroleum Institute’s number, but well-above analyst estimates of a 3.5 million barrel increase.

There wasn’t much damage to the downside since the large draw was priced in during the pre-market session. Additionally, a drop in crude oil imports and distillate fuel stocks partially offset the headline figure.

The EIA also reported that crude stocks at the Cushing, Oklahoma, delivery hub fell by 702,000 barrels. Gasoline stocks rose by 2.8 million barrels, compared with a 752,000-barrel drawdown estimate. Distillates, like diesel and heating oil, fell by 689,000 barrels, versus expectations for a 696,000-barrel draw.

Economic News

U.S. equities continued to march higher on Wednesday, driven by Trump’s promotion of his economic agenda and strong than expected economic data.

In economic news, the consumer price index (CPI) rose 0.6 percent in January, above the expected 0.3 percent increase. Retail Sales rose 0.4%, beating the 0.1% estimated, but coming in below December’s read of 1.0%.

On Wednesday, the Labor Department reported that U.S. consumer prices recorded their biggest increase in nearly four years in January as households paid more for gasoline and other goods, suggesting that inflation pressures could be picking up.

In the 12 months through January, the CPI increased 2.5 percent, the biggest year-on-year gain since March 2012. Economists had predicted an annual rate of inflation at 2.5 percent.

In other news, the Empire State Manufacturing Index also beat expectations with a reading of 18.7. However, Capital Utilization came in at 75.3%, slightly below the estimate and the previous read of 75.6%. Industrial Production also disappointed with a minus 0.3% showing. Nonetheless, investors were primary focused on the retail sales and inflation data.

Fed Talk

In her second day of testimony before Congress, Fed Chair Janet Yellen acknowledged that the economy is weak, but said Fed policies have been a help, not a hindrance.

“The economy has recovered more quickly, for example, than … European Union economies have in the aftermath of the crisis,” Yellen said. “The Federal Reserve has put in place highly accommodative monetary policies meant to spur spending in the economy and restore low unemployment or to achieve the goal of maximizing employment and price stability as assigned to us by Congress.”

“I believe we’re coming very close to achieving those objectives, and monetary policy remains accommodative,” she added.

With the GDP failing to break 3 percent for any year during the recovery and slow wage gains despite the economy having added 16 million jobs, Yellen was quick to point out that “Economic growth has been quite disappointing.”