Summary:

• Weekly DOE inventories drop by 5.4M barrels
• Print lower than expected and prior but In line with API
• Oil.WTI has reacted negatively and fallen back near its 1-month low 

A 9th successive drop in the weekly DOE inventory release has failed to cause any immediate upside in the price of crude, with Oil.WTI falling back below the $46 handle and close to its lowest level in over a month.

 The recent streak of drawdowns in the DOE release has seen inventories fall back below their equivalent last year. Source: XTB Macrobond

Given that the year began with a higher than usual base, we can normalise the data for more easy comparison to prior years. Below is a chart showing how inventories have changed this year compared to the previous onves, with the beginning of the year indexed to 100. 

 From an equal starting point the declines seen in inventories this year are in fact the greatest out of any in the past 6 years. Source: XTB Macrobond

A print of -5.4M was below the consensus forecast of -1.8M and the prior reading of -3.3M but broadly in line with last night’s API release of -5.8M. Whilst the continued declines seen in the headline number could be seen as supportive of the oil price, a closer look at some of the components of the report is not as positive for Oil bulls. 

For instance, the Cusing number rose to +0.7M from -0.5M prior and the Gasoline release increased to 0.0M from -1.2M last week. In addition, US crude production has risen once more, albeit marginally, to 9.53M BPD from 9.52M BPD.

 US oil production ticked higher once more (albeit by just 2k barrels per day). Production is now close to its highest level in the past 32 months. Source: XTB Macrobond 

Overall the release could be described as fairly neutral for the price of oil and with the current trend being lower there could be further declines ahead. The 8 and 21 period EMAs have recently printed a negative cross and whilst price remains below 47.20 then the bears appear to be in control of the tape. A break below 45.40 would be a clear negative development and pave the way for a retest of the 2017 lows around the $42 handle.

 

 Oil.WTI remains in a downtrend and today’s data offers little to suggest this will change anytime soon. Source: xStation