The oil market continues to stagger forward without direction, and the EIA data is offering little clarity. Just last week, the EIA reported a sharp build up in crude oil inventories, raising concerns about over supply. But inventories have seesawed back and forth for much of this summer, muddying the waters for analysts. Just this week, the agency reported a huge drawdown in stocks, restoring some bullish sentiment, and helping to push oil prices up more than $2 per barrel on Wednesday.
“One of the signs of a bullish market, in our view, is that prices prove resilient to highly bearish data, and can surge on moderate improvements,” Standard Chartered wrote in a note. “The oil market currently fits that description; prices recovered from last week’s extremely bearish data, and have risen on more encouraging signs this week.” The investment bank publishes a “bull-bear index” each week, factoring in the reams of data that come out of the EIA. Last week’s index hit “-100,” or the weakest result in years. This week, the index jumped to -28.5, not bullish by any means, but a sharp improvement from last week.
The crude inventory decline of 5.8 million barrels is the first thing that jumps out from the EIA report. The drawdown was sharper than analysts had predicted, and came a week after a huge 6.8-million-barrel increase. Last week’s jump in inventories corresponded with a flood of imports. Similarly, the sharp inventory decline in the most recent data is largely the result of a steep drop in imports at a time when refineries continued to run at elevated levels.That meant that lots of crude oil was taken out of inventory and processed into refined products. It’s no surprise then that gasoline stocks rose, and the build was counter-seasonal, which pushed gasoline stocks above the five-year average. But analysts aren’t concerned that this is a bearish signal. “We expect the refinery maintenance season to begin soon, correcting product oversupply,” Standard Chartered wrote in a note Oil production rose again, pushing U.S. output back up to 11 million barrels per day (mb/d). However, the EIA’s new practice of rounding off production figures to the nearest 100,000 bpd makes it tricky to discern production trends. The latest data suggests that there was an uptick in output from Alaska, not necessarily from U.S. shale in the Lower-48.