After 6 straight days of selling that wiped 12% off of crude oil prices, we’re seeing a bounce this morning after a relatively bullish inventory estimate helped put in a temporary price floor Tuesday afternoon.
The API was said to report inventory draws across the board yesterday. While the draw in crude was minimal, refined products were both estimated to decline by nearly 5 million barrels. The EIA’s weekly report is due out at 9:30am central, with no reports of a delay due to the winter weather that hit the East Coast this week.
Tuesday’s low at $47.09 sets a good short term technical support layer after prices bounced $1.75/barrel off of it. Longer term support layers come in between $44 and $45. Refined products have similar short term support at $1.4784 for ULSD, and $1.5623 for RBOB, with an additional 10 cents of downside likely if today’s rally turns out to be a dead-cat bounce.
The International Energy Agency and OPEC both released their monthly oil market reports this week, which showed little change in the current supply overhang, or the projections for the eventual rebalancing of global supply & demand.
The IEA is predicting slightly higher demand growth in 2017 than OPEC is, but the two numbers are quite similar, with both reports showing China and India remaining the engines for global economic growth this year, even though their rate of increase is lower than years past.
Buried on page 37 of the OPEC monthly report is further evidence that for the World’s key swing producer Saudi Arabia, lower crude oil output doesn’t necessarily mean lower exports as the country’s oil consumption has dropped sharply due to a slowdown in economic activity and advancements in natural gas replacing oil to support their electric grid.
This afternoon all eyes turn to the FED, as the FOMC announcement comes out at 1pm central – the 3rd interest rate hike in a decade is expected to be announced – followed by a press conference with the FED chair that may give more insight to the plans for additional hikes later in the year. In December the group predicted that 3 rate hikes were likely in 2017, and any deviation from that plan may move markets more than the actual rate increase will.