EIA Inventories Increase Halts Crude Rally

Weekly Crude Oil Inventories Report

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Inventories Rise Last Week

Crude oil prices have been trading broadly higher across the week. However, they ran into selling pressure mid-week in response to the latest report from the EIA.

The Energy Information Administration reported a build of over 500k barrels in headline US crude inventories in the week ending October 2nd.  This was almost double the 294k barrel increase forecast.

The result takes US crude stores back up to 492.9 million. This means stores now sit at 12% above their five-year seasonal average.

The report showed that net US crude imports had increased by 0.6 million barrels per day over the week, averaging 5.7 million barrels per day.

Over the last four weeks, the net import figure averaged 5.3 million barrels per day. This is 18.9% lower than the same four-week period in 2019.

Gasoline & Distillate Stocks Fall

In terms of other fuel categories, the report showed that US gasoline stocks fell by 1.4 million barrels over the week.

They are now sitting on their fiver year seasonal average.

Distillate stockpiles meanwhile, fell by a further 1 million barrels. This takes the total stockpile level down to 14% above their five-year seasonal average.

Demand Improving

In terms of gauging the level of demand in the market, the total products supplied number averaged 17.8 million barrels per day over the last four weeks.

This was down 14.8% on the same period last year.

This figure has been increasing over recent weeks, reflecting the continued pickup in demand as the post-lockdown recovery continues.

The total gasoline products supplied averaged 8.6 million barrels per day, down 6.7% on the same period last year.

Meanwhile, distillate products supplied averaged 3.6 million barrels over the last four weeks. This was down 9.3% on the same period last year.

Risk On Supporting Crude

Crude oil prices have been generally well supported this week given the rally in equities prices and broad rebound in risk sentiment. This comes as the dollar has resumed its sell-off.

The markets appear generally buoyant on the expectations that central banks are moving closer to another round of easing. This is due to concerns around the second wave of COVID-19 that continues to command market attention.

Crude Testing Bear Channel Top

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Crude oil prices are now testing the upper trend line of the bearish channel which has framed the correction lower over recent weeks.

For now, the bear channel can be viewed as corrective and a break above the channel top should signal the resumption of the bullish move off the year’s lows. For now, 42.43 remains the key resistance level to break.

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