Inventories Rise Again
Hopes of a fuller recovery in crude prices were left flat this week as the Energy Information Administration reported a sixth-consecutive weekly gain in US crude stores. The EIA reported that in the week ending February 28th, US crude stores rose by a further 785k barrels. This took the total inventory level back up to 444.1 million barrels. The increase was far less than the 2.6 million barrel increase forecast. However, news of the continued surplus has dented the recovery in crude prices.
Gasoline & Distillate Inventories Fall
The report was not totally bearish, however. Gasoline inventories were seen lower by 4.3 million barrels over the week. This far surpassed market projections of a 2.1 million barrel decrease. Gasoline stores are now back down at 252.1 million barrels.
Distillate stockpiles were also lower over the week. The category, which includes diesel and heating oil, was down by 4 million barrels over the week, surpassing market projections of a 1.9 million barrel drop to take inventory levels down to 134.5 million barrels.
Elsewhere, the report showed that refinery runs were down by 312k barrels last week with refinery utilization rates dropping 1%. Net US crude imports were also lower last week falling by 476k barrels today.
Crude Exports Break 4 Millin Barrels Per-Day
The most notable element of the latest report was in the exports category. US crude exports rose to 4.2 million barrels last week, passing back above the 4 million barrel mark for the first time since December. This latest increase is particularly noteworthy given that most analysts were expecting a much weaker figure due to reduced demand as a result of the coronavirus impact.
OPEC In Focus
Market focus now shifts to the OPEC meeting due today. Leaders of oil-producing nations of the cartel alongside non-OPEC members such as Russia are meeting in Vienna to asses the current supply restrictions which are due to expire this month. The market is fully expecting that the group will at the very least extend the current production cuts of 1.7 million barrels a day. Indeed, with oil prices down heavily on the year, there is a high level of expectation that the group will increase the scope of the cuts once again. This comes following a 500k barrel-per-day increase in December, in order to address the loss of demand in China as a result of the coronavirus-induced drop-in activity there. Earlier this week, Chinese manufacturing data was seen falling to its lowest level on record over February.
The current technical layout in crude looks very bearish indeed. Price continues to move lower within the bearish channel which has framed the sell-off from 2020 highs. Despite the recent correction, price remains below the 49.56 – 50.69 resistance and, while below here, looks likely to continue lower. The next key level to watch will be the 42.40 2018 lows. A break here would pave the way for a much deeper move in crude prices.