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One of Rigzone’s regular market forecasters takes a look at some recent market surprises, the EIA inventory update, the Fed’s effect on the oil market and more. Read on for more details.
Rig zone: What were some market expectations that actually played out over the past week and which expectations didn’t?
Barani Krishnan, Senior Commodity Analyst at uk.Investing.com: US crude stockpiles saw another decline last week [Editor’s note – week of April 14], according to commercial expectations. Pretty much everything else was unscripted, meaning surprises, only surprises didn’t bode well for that long oil.
Rig zone: What were some market surprises?
Krishnan: The weekly inventory update from the US Energy Information Administration, or EIA, cited a larger-than-expected drawdown of 4.581 million barrels in the week ended April 14 , EIA reported. In the week prior to April 7, crude oil inventories rose by 0.597 million barrels. Industry analysts tracked by Investing.com had expected the EIA to report a decline in crude stockpiles of just 1.088 million barrels last week [Editor’s note – week of April 14].
As for gasoline inventories, however, the EIA cited a build of 1.3 million barrels compared to an expected drop of 1.267 million barrels, and versus the previous weekly drop of 0.331 million … With distillate stocks, the EIA reported consumption of 0.356 million barrels, against expectations for a drop of 0.927 million barrels and versus the previous week’s consumption of 0.606 millions
The inventory numbers weren’t the only surprise. Almost every day this week [Editor’s note – week of April 21], crude oil prices fell two percent… The trigger for the sell-off was heightened anxiety in markets ahead of the Fed’s expected rate hike on May 3, the 10th rate since the end of the pandemic, which would add a full five percent to rates compared to the March 2020 peak of 0.25 percent. Fed officials acknowledge that persistent rate hikes would slow the economy and lead to a recession. But a recession is better than runaway inflation, they seemed to have decided.
For oil bulls, of course, nothing could be more exasperating. After the gift of a 1.7 million bpd cut announced by OPEC+ earlier this month to add to the cartel’s long-standing two million bpd cut, oil markets have bounced back to fail At Thursday’s close, West Texas Intermediate, or WTI, crude traded in New York closed up $1.87, or 2.4 percent, at $77.29 a barrel, following a three-week low to $76.97. London-traded Brent crude, the world oil benchmark, ended the day down $2.02, or 2.4 percent, at $81.10 a barrel, after a low of three weeks at $80.78.
The OPEC+ production maneuver had pushed WTI above $83 just earlier this month and Brent above $87.
Rig zone: What news/trends will you be waiting for this week?
Krishnan: More oil weakness ahead of Fed rate decision on May 3.
To contact the author, please send an email andreas.exarcheas@rigzone.com
