With the APIs being very bullish on Tuesday and the DOEs looking bullish on products, but overall bearish on crude inventories, you would think this market would continue to strengthen. Today, the market decided that it had enough over the last week. On Monday, May 9th, diesel finished down -$.0500, and since then it took off, with one flat day on May 12th. The crude inventory build in the DOE statistics was unexpected, building 1.3 million barrels. That, mixed with the continuous up days, could be the reason this market is falling today. As of 12:00 PM EST, diesel is down $.0200, gas down $.0300, and crude down $.47, to $47.74.
Over the last seven sessions, there has been a 10% rally in the U.S. crude futures mainly due to the wildfires in Canada and strikes in Libya and Nigeria. Yesterday, the U.S. dollar surged after the Federal Reserve’s policy meeting, which reported that the U.S. central bank will most likely raise interest rates in June. Talk of a rise in interest rates directly affects the U.S. dollar, and it will only rise if Q2 economic data has improved. OPIS had a quote from Commerzbank expressing the bank’s opinion on the swinging of prices: "The fact that oil prices achieved new highs shortly after the publication of the inventory data was no doubt due in part to the sharp fall in oil product stocks," Commerzbank said in an early Thursday note. The German bank added that higher crude imports on the U.S. Gulf Coast offset supply disruptions of Canadian heavy oil.
- Cooler weather and an onset of rain ahead could put a final end to the Canadian wildfires.
- May and June loadings of Nigerian Qua Iboe crude expected to be deferred by 8-15 days.
- The Fed announcement and crude build are both driving this market down. Is that enough to thwart this market surge?
- After taking a look at the EIA Drilling Productivity Report on Monday, the data on shale production confirms the falling trend in US oil output.