Inventory fall to stabilize the Oil Market

Summer demand pays-off

By: Ahura Chalki

Market analyst – IFC Markets

Last night’s and today’s API and EIA reports confirmed another fall in US weekly Oil inventories. Before going forward, let’s check the detail of this report. 

According to Energy Information Administration’s report, Crude Oil inventories decreased by 4.1Mb in the week ended July 23, more than 2.928Mb market estimates. In the same week, Distillate inventories (Including Diesel and Heating Oil) fell by 3.088Mb, much more than the 435Kb market expectation. Also, EIA reported the 2.253Mb decrease in the Gasoline inventories, compared to the 916K draw estimates. 

With this report and data, we have a balanced market between demand and supply. The report shows a strong demand in the market, as it was expecting to be in the summertime; however, on the other hand, Oil and, generally, the energy market was underperformance with increasing new infected cases all around the globe to the Delta variant of Covid-19. On the other hand, optimism and worries are all expected to hold the current range market ahead of the FOMC policy meeting announcement and Mr. Powell’s speech. 

We have US GDP on Thursday and Friday, Germany and Canada will publish the GDP numbers for the next day. As GDP is the leading economic indicator, increasing the economic activities in these developed economies will be positive for Oil and the overall energy market. Conversely, the missing data must put the prices under pressure. 

From the technical point of view, as we can see in the below chart, candles reflecting the fundamental data and news, with side movement. Crude Oil has been limited between $71 and $72.10 since July 22. It was moving at the almost same range several times before on its way towards multi-month high and then in the correction towards $67, has been seen July 20. Usually, we can see a more significant jump when we have this kind of range movement for few days. Since most technical indicators remain bullish at this level, like RSI at 58 and ascending tendency of OBV trend line, we can bet more on up-trend form here than decreasing the prices. 

Oil Market

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