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Market Wire
Inventories Grow, Crude Price Trades Lower

December 6, 2017

Total crude and refined product inventories in the United States rose in the week ending December 3. The rise in inventories was bigger than expected – but not as large as yesterday’s forecast from the American Petroleum Institute. Both West Texas and Brent benchmark crude prices are slightly lower after the announcement.

The Energy Information Administration reported total inventories rose by 2.9 million barrels, beating market expectations for a rise closer to the 1.2 million level.

Actual Vs. Expected Storage Numbers
Crude:              -5.6 mmbbl       vs.  –2.5 mmbbl
Gasoline:          6.8 mmbbl       vs.     2.6 mmbbl
Distillates         1.7 mmbbl       vs.      1.1 mmbbl

Crude index prices have remained largely range-bound this week, as fundamentals have sent mixed messages to the market. On Thursday, the Organization for Petroleum Exporting Countries (OPEC) and Russia agreed to extend a production cap through the end of 2018, but the announcement was largely in line with market expectations, with the only real surprise involving Nigeria and Libya agreeing to limit production at 2017 levels. Both countries had previously been exempt from the agreement, as they were dealing with their own internal supply issues.
On Friday, Baker Hughes announced another week of increased rig activity, prompting markets to wonder whether the production cap is enough to curb a potential increase in shale oil production.

Bottom Line: Oil prices seem to have found a floor, for now – but until a winner in the race between US producers and their OPEC competitors starts to establish a lead, a significant break higher looks unlikely.

Shane Thomson
Foreign Exchange Trader


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