Oil Slides Below $40 As Crude Inventories Rise
Oil video 10/7/20.
Crude oil inventories increase by 0.5 million barrels
Yesterday, API's Crude Inventory Change Report found that crude oil inventories were up 0.95 million barrels. The weekly EIA status report showed today that inventories have increased by 0.5 million barrels, confirming the inventory surge highlighted in the API report.
Crude oil imports rose 0.6 million barrels per day (bpd) and served as the main catalyst for the increase in inventories.
Meanwhile, gasoline inventories decreased 1.4 million bpd while distillate fuel inventories decreased 1 million bpd.
Domestic oil production in the US has finally increased from 10.7 million bpd to 11 million bpd. This would have been a worrying development for the bulls, but oil production will take a new blow from the Hurricane Delta so traders will not have to worry about rising production in the short term.
In general, the report painted a rather positive picture. The increase in crude oil inventories was small, while gasoline and distillate fuel inventories decreased.
As mentioned earlier, the market will not have to worry about a new uptrend in US oil production for some time. However, there are many factors that are currently affecting prices. As a result, the inventory report may not be enough to add an extra boost to oil.
Stimulus Drama and Hurricane Delta increase the volatility of the oil
In addition to the latest inventory report, oil traders are trying to reflect on recent developments on the stimulus front and the potential impact of Hurricane Delta.
US President Donald Trump put significant pressure on the markets when he announced that negotiations on the coronavirus aid package with Democrats would end.
He later signaled that he was ready to sign a smaller bill that included stimulus checks, aid to the airlines, and funding for the paycheck protection program.
Any stimulus package will serve as a bullish catalyst for the oil market as it supports the economy and consumer activity. However, it is not clear whether a consensus on the new economic agreement could be reached before the November elections.
Meanwhile, Hurricane Delta has already displaced more than 0.5 million bpd from the market as offshore oil producers had to evacuate workers from platforms. This means US oil production will not be able to stay at the 11 million bpd level, which is good for the oil market in the short term.
In our economic calendar you will find all economic events of today.
This article was originally published on FX Empire
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