In the week ending November 15, EIA reported a build in crude oil inventories, driving WTI prices lower. On Wednesday however, crude prices rose despite EIA reporting another successive build. The rise in stocks was smaller compared to analysts’ expectations.
Both API and EIA reported negative results for the week ending November 22nd. These weighed on the yearly net build despite talks about deeper production cuts.
This is now the fourth consecutive build, highlighting the need for clarity surrounding stalled trade talks.
Crude Inventories Build Turns Bullish
The EIA reported a build of 1.379M barrels for the week ending November 21. This is almost half the previous week’s build of 2.219M barrels, signaling a slowdown in the pilling rate.
Besides rising crude stocks, EIA also reported a rise in gasoline stock, partially supporting the increase in oil prices.
Crude moved from 55.77 before the release to a daily high of 57.35 following the report as the actual build missed analysts’ bearish expectations of 1.543M barrels.
Production Rate Slowdown Hints to Higher Prices
Based on EIA’s drilling productivity report, shale oil production is heading higher, however, at a decelerating rate. Last week, oil rigs also showed that there might indeed be increased demand as the count was at a multi-year low.
Although the rise in new-well production could cause short-term discrepancies, it is likely to be offset by increased demand as we enter the winter season.
The OPEC+ deal reached in October 2018 is also affecting prices as Russia remains somewhat non-compliant with cutting output. Russia was supposed to cut output a month ago but remains hesitant in doing so.
Oil Prices Affected By Aramco IPO Valuation
The weekly price movement was highlighted by Aramco’s valuation early in the week. WTI prices fell after the state-owned company announced that they will be offering only 1.5% of the total stake in its IPO.
With the original valuation at $2T, the price drop was a result of the lackluster stake Saudi Arabia has announced to make available. All the while, the country’s move would lighten up the heavy reliance on oil exports and diversify its economy while reducing its budget deficit.
Next month’s IPO could keep markets under pressure. Investors will be looking to grab as many shares as possible.
WTI Looks Bearish In the Medium Term
When adding pressures from Russia’s non-compliance, higher production, and distillate activity, oil has good chances of reaching at least the previous low towards the 50.00 mark.
The current structure, as part of the intermediate degree wave (3), looks bearish. The correction up to 57.38 could have acted as a retracement level. Fibonacci is projecting the 1.618 and then 2.0-2.618 extensions as potential stops.
This assumes the decline continues below 54.90 since the triple combination ((w)-(x)-(y)-(x)-(z)) has ended.