U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Wednesday, but remain inside yesterday’s trading range. The price action suggests investor indecision and impending volatility.
Gains are likely being capped by a surprise build-up in U.S. crude stockpiles, which stoked concerns over a global supply glut even as a spike in global COVID-19 cases fueled fears of a slower recovery in fuel demand.
The markets are likely being underpinned by a weaker U.S. Dollar and optimism over a possible fiscal stimulus deal that could lead to payouts to consumers before the November 3 elections.
At 10:17 GMT, December WTI crude oil is trading $41.13, down $0.57 or -1.37% and December Brent crude oil is at $42.63, down $0.53 or -1.23%.
American Petroleum Institute Weekly Inventories Report
The API on Tuesday reported a build in crude oil inventories of 584,000 barrels for the week-ending October 16. Analysts were looking for an inventory draw of 240,000 barrels.
The API also reported a draw in gasoline inventories of 1.622-million barrels of gasoline for the week-ending October 16 – compared to the previous week’s 1.513-million barrel draw. Analysts had expected a 1.767-million barrel draw for the week.
Distillate inventories were down by 5.983 million barrels for the week, compared to last week’s 3.930-million barrel draw, while Cushing inventories rose by 1.174-million barrels.
Bearish Bits and Pieces
No surprises here. Worldwide COVID-19 cases crossed 40 million on Tuesday, with some parts of Europe imposing renewed lockdown measures.
On the supply side, Russia’s energy minister said on Tuesday it was too early to discuss the future of global oil production curbs beyond December, less than a week after saying plans to scale back existing output restrictions should proceed.
Meanwhile, OPEC member Libya, which is exempt from the cuts, is also ramping up production after armed conflict shut almost all of the country’s output in January, pumping more oil into an oversupplied market.
Stimulus Hopes Offer Support
Some support for crude oil prices came from the White House and Democrats in the U.S. Congress moving closer to agreement on a new coronavirus relief package that could boost fuel demand as President Donald Trump said he was willing to accept a large aid bill.
Today’s Energy Information Administration (EIA) weekly inventories report, due to be released at 14:30 GMT, is expected to show a 0.5 million barrel drawdown, but this could change because of the API report. However, due to the impact of Hurricane Delta on production about two weeks ago, I think the inventory numbers are a little skewed.
Propping this market higher is the stimulus package news. Although the new government money is not expected to change the longer-term outlook in the market, it could give the economy enough of a jolt to spike prices higher. Think about it, the economy could see an infusion of $1.8 to $2.2 trillion by November 3.
It may not be enough to solve any longer-term problems or make the COVID-19 pandemic go away, but it could drive up demand for gasoline at least temporarily.
The way I see it, the inventory numbers are stale data from last week, but the stimulus money is a future event. Today’s sideways price action suggests to me that investors are leaning to the upside, at least temporarily.
For a look at all of today’s economic events, check out our economic calendar.