Crude Inventories Rise
The latest data from the Energy Information Administration showed an unexpected decrease in US crude stores. Over the week ending January 10th, US crude inventories were lower by 2.5 million barrels.
This inventory drawdown was in sharp contrast to the expected 500k barrel increase the market was looking for.
With this latest drawdown, US crude stores are now sitting at 428.5 million barrels, the five year average for this time of year.
Gasoline Inventories Climb
The data also showed that gasoline inventories were higher over the week.
Gasoline inventories rose by 6.7 million barrels, now sitting around 5% above the five year average for this time of year.
Distillate stockpiles, which include diesel and heating oil, were also seen higher by 8.2 million barrels. They are around 3% down on the five year average for this time of year.
Crude Imports Fall
Looking at the rest of the data, US crude imports were down by 179k barrels per day on the previous week, averaging 6.6 million barrels per day.
Over the last four weeks, crude oil imports have been down 13.1% on the same period last year, sitting also at 6.6 million barrels per day on average.
Fading US/Iran Tensions
Despite news of the drawdown in inventories, crude prices saw only limited buying. It seems for now, that crude prices are still weighed down in the wake of the reversal in tensions between the US and Iran.
Crude prices exploded higher on news of the Iranian retaliation against the US last week. However, following Trump’s restraint reaction to the event, the risk of a further escalation in hostilities has subsided.
US/China Trade Deal Impact
The US/China trade deal, signed this week in Washington, should offer some support to crude in the near term. This is especially true if the two countries can quickly make a start on the second round of negotiations.
However, given the risk that the next round of talks will take longer and possibly be more fractured than last year’s talks, it will take some visible positive momentum to drive crude prices higher in the short term.
The rally in crude has now reversed sharply and as price heads back down towards the triangle’s rising trend line, there is a risk that the break above the triangle top might prove to have been a flaws breakout, suggesting scope for a further move lower.
To the downside, the next key level is the 57 mark, with the rising trend line support coming in below. A break below there could open up the way for a run down to deeper support at the 51-level.