Oil prices are rebounding slightly this morning after yesterday’s big sell–off, amid the EIA data released yesterday morning and a weaker dollar responding to the Bank of England not cutting interest rates. A recap of the EIA numbers had gasoline with a build of 1.2 million barrels and distillates with a build of 4.1 million barrels. This bearish data sent the market down significantly despite a draw in overall U.S. crude inventories and Cushing inventories of 2.5 million barrels and 232,000 barrels respectively. At the close yesterday, heating oil was down $0.0823 while RBOB settled down $0.0517. In addition, the RBOB crack spread continues to be under pressure as gasoline consumption has slowed more than expected in recent months.
Even with today’s rally, analysts are cautious, saying a downtrend could resume soon as record high inventories and slowing economic growth are still the prevalent themes in this market. “The oil market is oversupplied, OPEC production is on the rise and we had a rather bearish weekly U.S. oil stats report,” said one London based analyst. Other analysts agree, suggesting a bigger downward move could be in the future after three months of strength. “The market moved up to $50 quite fast , so we might go down and see whether there is anything below $40,” stated another trader.
Some global topics to keep an eye on:
- Leadership changes in the U.K. after Brexit
- Continued Fed rhetoric regarding interest rates
As of this morning, heating oil is up approximately $0.02 while RBOB is up close to $0.03.