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

Published 12/09/2020, 10:10 AM
Updated 12/09/2020, 04:24 PM
© Reuters.

© 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.

Latest comments

How long before stressed producers lock in small profits @$46 a barrel?
expect the opposite of whatever EIA claims
Common up
Who cares Buy Long we need more OIL because of Stimulus, Vaccine, soon is all on the road again the crisis is over ;-)
first the virus then the debt
There wasn’t any crisis😁
gold will rise too
Are you sure
definitely, one day it becomes real
oil is going up *******
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.
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.
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.
So where are your hopes ??? LOL
Hopes are sleeping for a while
aiyaa dea le macaaa... why gap down...
I don’t know how this was unexpected, especially with the lock downs taking place.
oil is out. electric is in.
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.
That's a pretty big miss on estimates
these estimates are becoming increasingly inaccurate and useless, someone should be fired
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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