The market is rebounding for the first time in about 2 months. A number of factors are at play in this, including colder weather, short coverings, international tensions and continuing talks of reducing global production. Also contributing were emerging market currencies, which rose on speculation that central banks will expand stimulus measures, fuelled by European Central Bank president Mario Draghi’s comments on Thursday. Draghi indicated the ECB may cut interest rates and expand stimulus efforts this year. Many analysts think that this rally will be short-lived and that we still have not seen the bottom, given the current global surplus.
After a mild December, low temperatures over the past few weeks have likely caused the 1 million barrel draw in distillate inventories seen in the DOE weekly statistics. The weekly stats also highlighted an increase in U.S. crude inventories by 4 million barrels from the previous week, leaving inventories at levels not seen in the past 80 years for this time of year. Gasoline inventories also increased by 4.6 million barrels over the previous week, and are also above their average range.
The much-anticipated northeastern snow storm, Jonas, may cause an increase in demand for heating oil. This may also be a short term boost, with anticipated temperatures back above freezing by Monday.
Bloomberg News: WTI rallies after ECB President Mario Draghi suggests on Thursday that he's prepared to boost stimulus.