US Weekly Crude Oil Inventories post a surprise drawdown as inventories fell 4.90 million in the week ending April 1st, 2016
Summary:
Crude Oil prices gained strongly yesterday with fundamentals supporting the rally. Weekly Crude Oil inventory report released by the US Energy and Information Administration showed a surprise drawdown for the week ending April 1st. US commercial crude oil inventories fell 4.90 million, against analyst expectations of an increase of 3.10 million in inventory following the previous week’s increase of 2.30 million. Ahead of the EIA’s report, the API report released on April 5th showed a drawdown of 4.30 million against estimates looking for a 2.90 million increase. Overall, yesterday’s drawdown in Crude Oil has managed to end a 7-week buildup in inventories. Following the release, Crude Oil futures gained strongly, rising by as much as 3.20%. The FOMC meeting minutes released later in the evening came out dovish, weakening the US dollar thus helping WTI crude oil prices to extend further the gains. By yesterday’s close, WTI Crude Oil settled at $37.72 a barrel.
The OPEC and non-OPEC member meeting is also due on April 17th and is likely to weigh on the markets. While there were bickering among various countries, most recent comments from Kuwait’s OPEC minister Nawal al-Fezaia were encouraging for Oil prices. He said that “Oil producing countries have no option but to reach an agreement to freeze output when they meet on April 17th in Doha because prices are low.” While the headline might seem positive, the fact remains that differences still prevail. Saudi Arabia is now talking about freezing its Oil production at February levels, which are higher than they were in January. It remains to be seen how Iran will react to the matter. Iran was quite clear that it would not consider Oil production freeze unless it hits a 4 million barrel per day production levels. However, backdoor channels might prove to spring a surprise amid all the noise.
