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Yesterday, I mentioned that today’s EIA Crude Oil Inventories report would be the key to understanding oil’s next move.
Well, the numbers are in… and they’re big.
The Energy Information Administration (EIA) expected a 2M surplus, but they got a whopping 5.8M surplus.
That’s nearly triple what they were anticipating!
It’s a massive build-up in supply, and it matches what we saw in the API crude stocks report last night, which also came in way above expectations.
To put it in perspective, the American Petroleum Institute (API) expected a 1.95M surplus and saw a 10.9M surplus — over five times bigger than expected.
So what’s the takeaway?
On one hand, this data suggests there’s a lot more oil on the market than people thought. If there’s too much supply and not enough demand, prices usually drop.
But that’s not the whole story…
The EIA also expected a draw of -1.5M barrels on gasoline but saw a much larger -6.3M draw. That’s a sign that gasoline demand is stronger than anticipated.
It’s a bit of a mixed message.
The massive gasoline draw contradicts the EIA’s short-term outlook released yesterday, where they downgraded demand projections for developed economies.
So, while the oil surplus seems to indicate oversupply, the gasoline data shows people are still driving and consuming fuel at higher rates.
This may be a one-off due to recent hurricanes, which could explain the uptick in gasoline demand.
Either way, it’s a situation that I’ll be watching.
With the market still digesting all of this, I’ll be keeping a close eye on oil prices over the next few days to see if the data starts pulling them in one direction or the other.
— Geof Smith
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