Oil prices fell this morning on indications that US stocks unexpectedly rose.
Rystad Energy’s Head of Oil Markets, Bjornar Tonhaugen, has commented on the morning's news:
"While traders and analysts expected US oil storages would be modestly relieved last week, indications from the American Petroleum Institute show that stocks built quite a lot.
Taken the development, what else can you do as a trader but rush to sell and depress the price. And then of course, when on the safer side, scratch your head and try to digest what happened.
Shut-in production that is coming back and offshore stocks that had been waiting to be unloaded are the likely reason for such a build, if indeed it reached such levels.
Overall, yes demand is returning and indeed deficits are coming, but we are in this transition period and stocks can fluctuate a bit. It’s like the early summer rain.
We believe the trend over the next few weeks is for US crude stocks to gradually draw as supply-demand rebalances. However, the market is also concerned that we could be in for a surprise from both the supply and demand side. Shut-in production returning and a rise in Covid-19 cases scare traders – and markets – so people are cautious to not go too far with pricing oil.
On the demand side, refineries could choose to hold back on increasing runs into the summer as refinery margins are hurt by the sudden rise in crude prices and lagging price increases in refined products they produce.
Especially, US diesel stocks are bulging as refiners churn out too much diesel, including the jet fuel cut blended into the diesel pool, while diesel demand has not yet picked up in the same way as gasoline.
On the supply side, we see that US shale producers bring back parts of the 1.65 million bpd of curtailed production more quickly than initially expected.
Weekly stats from the US crude balance are frequently noise, but sometimes reveal early warning signs. Wednesday mornings are always in for surprises as - OPEC meeting being behind us - how stocks develop is among the few left ‘hidden cards’ on the trading table."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/10062020/oil-dips-on-us-stocks-surprise/