Crude Inventories Rise Again
In yesterday’s report, the Energy Information Administration reported a further build in US crude inventories. In the week ending March 20th, the EIA reported that US commercial crude levels rose by 1.6 million barrels.
Although this wasn’t as high as the 2.8 million barrel increase forecast, this latest increase means that US crude inventories have been in a surplus for nine straight weeks, a worrying indication of weakened oil demand.
Crude levels are now back up to 455.4 million barrels.
Refinery utilization was still running relatively firmly this week with rates increasing by 0.9% to 87.3% of total capacity.
However, the EIA notes that refiners have been reducing their inventories of gasoline and diesel fuel. These are now at their lowest levels since December. This reflects refiner expectations of a continued decline in demand.
Gasoline & Distillate Stockpiles Down
The report showed that US gasoline inventories were down by 1.5 million barrels last week, falling to 239.3 million barrels. This drop was more than double the forecast 657k barrel drop the market was looking for.
Distillate stockpiles were also lower last week. The category, which includes diesel and heating oil, was down by 679k barrels to 124.4 million barrels in total. However, the drop was less than the 1.9 million barrel drop the market was looking for.
Notably, the EIA noted that its measure of products supplied, used as a proxy to gauge US crude demand, slowed by 2.1 million barrels per day over the week to 19.4 million barrels per day in total.
The widespread lockdowns under-way in the US are dramatically impacting demand for oil. Looking ahead, there are concerns that the US summer driving season (which is typically a time of high demand for oil) will be impacted unless restrictions are lifted in time.
Coronavirus Weighing on Crude
Crude prices have been under heavy selling pressure over the last two months. This is a direct result of the coronavirus outbreak which has heavily hit the manufacturing industry and seen governments around the world imposing lockdowns.
With new cases of the virus and deaths still rising globally, this disruption looks set to continue and crude is vulnerable to further downside.
Crude Still Capped By Resistance At 26
Crude has been rallying this week amidst the broader recovery in risk appetite as central bank easing starts to take effect. However, for now, crude remains capped by the 26 level resistance. This is a major long term level. While below here, further downside is likely with 17.12 and 10.72 the next key levels to watch.