Crude Inventories Rise Again
Crude prices have been under pressure again this week. The latest report from the Energy Information Administration revealed a further rise in US crude inventories. The EIA reported that in the week ending March 27th, US crude inventories rose by 13.8 million barrels. This was three times the 4.6 million barrel increase forecasted and marks the tenth consecutive rise in inventory levels.
This data comes on the back of the API reporting a 10.5 million barrel increase in inventory levels a day earlier. This reflects the massive lack of demand due to the ongoing coronavirus crisis. With large swathes of the US on lockdown, oil demand has been decimated. It looks set to remain subdued until the lockdowns are over.
Gasoline Demand Sees Record Drop
Gasoline demand saw its largest ever one-week decline. The products supplied number (which is used as a proxy for gauging demand) dropped by 2.2 million barrels to 6.7 million barrels per day. Along with the drop in demand, US gasoline inventories were higher by 7.5 million barrels, rising to 246.8 million barrels. This figure was higher than the 1.9 million barrel increase forecasted.
Distillate stockpiles, which contain diesel and heating oil, were lower last week. The category fell by 2.2 million barrels. This was in stark contrast to the 1 million barrel rise forecasted. The EIA noted that diesel demand was showing more resilience than motor gasoline. This is due to the number of deliveries being made to US homes as a result of the lockdown.
Coronavirus Reducing Crude Demand
Crude prices have been heavily sold over recent weeks as the coronavirus crisis continues to squash demand. Along with the lockdowns around the globe which have seen reduced industrial demand, crude has also suffered a loss of demand from the aviation sector. This comes as more countries announce flight restrictions and airlines reduce services further. In the UK this week, airline provider Easy Jet announced that it was grounding all 330 planes in its fleet due to the travel restriction and loss of demand.
For now, with the crisis still ongoing, crude prices are likely to remain under pressure. Countries such as Spain have already extended their lockdowns to the end of April. There are expectations that the US and UK will announce extensions also.
Crude Prices Testing Trend Line Support
Crude prices have fallen below the 26 level 2016 lows are and are currently testing trend line support. While price remains below 26, focus will be on the next two structural levels below market at 10.72 and 17.12. If price can recover above the 26 level, however, the next topside level to watch will be the 35 mark. This is ahead of the next major structural resistance up at 42.39. This would mark the closing of the gap from the end of February.