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Oil Longs Ignore Monstrous U.S. Crude Build to Cling to $45/bbl

CommoditiesDec 09, 2020 04:24PM ET
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© Reuters.

By Barani Krishnan

Investing.com - Gold longs have thrown in the towel for now in their pursuit of $1,900 an ounce and even U.S. equity markets pulled back sharply Wednesday. Oil bulls remain steadfast, however, in the belief that crude prices can only go higher despite a monstrous weekly build in stockpiles.

Crude inventories rose by 15.2 million barrels last week compared with analysts' expectations for a 1.42 million-barrel drawdown, the Energy Information Administration said on Wednesday.

That was not the only build announced by the EIA.

Distillate stockpiles, which include diesel and heating oil, rose by 5.2 million barrels during the week ended Dec. 4, against expectations for a 1.41 million barrel increase, the agency’s data showed.

U.S. gasoline inventories rose by 4.22 million barrels last week the EIA said, compared with expectations for a 2.27 million-barrel build.

Despite the staggering inventory jumps, oil prices barely fell.

New York-traded West Texas Intermediate, the leading indicator for U.S. crude, settled Friday’s trade down 8 cents, or 0.2%, at $45.52 per barrel. On Tuesday, WTI hit $46.68, its highest level since March.

London’s Brent, the global benchmark for crude, actually finished the day higher, rising a mere 2 cents to settle at $48.86. Brent hit a March high of $49.86 in the previous session.

Oil prices have been on a tear over the past month on bets that people across the world might soon be able to travel freely as millions of doses of coronavirus vaccines were being prepared for delivery over the course of the next few weeks, after their approval by U.S. and U.K. health authorities.

Also helping market sentiment was the apparent discipline by oil producer group OPEC+ in allowing a hike of just 500,000 barrels per day in total by its 13 members and 10 allies — versus initial talk of a 2 million bpd hike. 

Even so, the market’s refusal to buckle in the face of the inventory builds announced by the EIA on Wednesday was surprising. Earlier in the day, gold prices fell as much as $40 per ounce from session highs while Wall Street’s Dow and Nasdaq both fell sharply as Covid-19 stimulus talks in the U.S. Congress appeared to break down again.

“I just think the oil market continues to be as hopeful about the future oil demand promised by the vaccine,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. “When the crash comes, it will probably be as horrific as it can be.”

The EIA data showed a 1.1-million barrels per day rise in imports from the previous week as one of the catalysts for the crude build.

A drill down of the agency’s numbers showed a 12 million barrel build in the Gulf Coast of Mexico, and  3.2 million barrel gain in the West Coast.

The builds suggested that Saudi Arabia, which had led export cuts to the U.S. market for months, leading the OPEC output curtailment, has started ramping up crude cargoes to America again.

Oil Longs Ignore Monstrous U.S. Crude Build to Cling to $45/bbl
 

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Comments (20)
Don Grif
Don Grif Dec 09, 2020 9:22PM ET
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How long before stressed producers lock in small profits @$46 a barrel?
Big Al
Big Al Dec 09, 2020 7:27PM ET
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expect the opposite of whatever EIA claims
Agus Riyadi
Agus Riyadi Dec 09, 2020 2:19PM ET
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Common up
Lex Wild
Lex Wild Dec 09, 2020 12:38PM ET
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Who cares Buy Long we need more OIL because of Stimulus, Vaccine, soon is all on the road again the crisis is over ;-)
Felipe Coutinho
Felipe Coutinho Dec 09, 2020 12:38PM ET
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first the virus then the debt
Дмитрий Сильвестров
Дмитрий Сильвестров Dec 09, 2020 12:38PM ET
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There wasn’t any crisis
Mohammad Mousapour
Mohammad Mousapour Dec 09, 2020 12:22PM ET
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gold will rise too
Agus Riyadi
Agus Riyadi Dec 09, 2020 12:22PM ET
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Are you sure
Дмитрий Сильвестров
Дмитрий Сильвестров Dec 09, 2020 12:22PM ET
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Agus Riyadi definitely, one day it becomes real
waqas emmi
waqas emmi Dec 09, 2020 12:13PM ET
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oil is going up *******
Michael Voss
Michael Voss Dec 09, 2020 11:52AM ET
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Structural change in the economy. WFH is just as productive and more cost efficient. Small businesses closing in the 1,000s. Fed better bail out states, California is 5th largest economy in the world. Send stimulus money, low income earners have a high propensity to spend. Consumption is 66% of US economy. Protect businesses from Coronavirus lawsuits. Pass Earned Income Tax Credit. Reverse permanent corporate tax cut. Sell bonds buy high yield stocks.
Michael Voss
Michael Voss Dec 09, 2020 11:52AM ET
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Structural change in the economy. WFH is just as productive and more cost efficient. Small businesses closing in the 1,000s. Fed better bail out states, California is 5th largest economy in the world. Send stimulus money, low income earners have a high propensity to spend. Consumption is 66% of US economy. Protect businesses from Coronavirus lawsuits. Pass Earned Income Tax Credit. Reverse permanent corporate tax cut. Sell bonds buy high yield stocks.
Michael Voss
Michael Voss Dec 09, 2020 11:51AM ET
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Structural change in the economy. WFH is just as productive and more cost efficient. Small businesses closing in the 1,000s. Fed better bail out states, California is 5th largest economy in the world. Send stimulus money, low income earners have a high propensity to spend. Consumption is 66% of US economy. Protect businesses from Coronavirus lawsuits. Pass Earned Income Tax Credit. Reverse permanent corporate tax cut. Sell bonds buy high yield stocks.
Samy VM
Samy VM Dec 09, 2020 11:51AM ET
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So where are your hopes ??? LOL
Дмитрий Сильвестров
Дмитрий Сильвестров Dec 09, 2020 11:51AM ET
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Hopes are sleeping for a while
MK MK
MK MK Dec 09, 2020 11:23AM ET
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Why do they write "prediction" of those sheeplists? They normally wrong about 50%
Дмитрий Сильвестров
Дмитрий Сильвестров Dec 09, 2020 11:23AM ET
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Low-power-predictability
Atif Sidqi
Atif Sidqi Dec 09, 2020 11:16AM ET
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aiyaa dea le macaaa... why gap down...
Ric Tabisola
Ric Tabisola Dec 09, 2020 11:08AM ET
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good news... oil stockpiles rise and prices go down... UVXY goes UP make that money... quit whining.
Dustin Berg
Dustin Berg Dec 09, 2020 11:08AM ET
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uh no....rising inventory will lower the price of oil. economics,101. a glutton will lower the price, but this will change so good time to buy.
Jamaal Goonyacade
Jamaal Goonyacade Dec 09, 2020 11:00AM ET
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amalExprsess +252907718159
Robert Nchor
Robert Nchor Dec 09, 2020 10:52AM ET
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I don’t know how this was unexpected, especially with the lock downs taking place.
roger ramos
roger ramos Dec 09, 2020 10:44AM ET
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oil is out. electric is in.
howard berg
howard berg Dec 09, 2020 10:43AM ET
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If who ever is monitoring the oil stockpile was surprised by an 'unexpected 15.2 barrels' then they are not doing a very good job on keeping up with what's going on.
Notvery Goodathis
Peteymcletey Dec 09, 2020 10:41AM ET
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That's a pretty big miss on estimates
Jaime Quadra
Jaime Quadra Dec 09, 2020 10:41AM ET
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these estimates are becoming increasingly inaccurate and useless, someone should be fired
Mojo Snake
Mojo Snake Dec 09, 2020 10:39AM ET
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That's hilarious the person who set the expected amount should be fired.   Everybody must have bought Teslas.  That would be the only reason for their crazy valuation....
 
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