Oil recovery might be triggered by shrinking US crude oil inventories - Commerzbank

With oil markets likely to lack “major news” this week, the weekly report from the US Department of Energy should receive increased attention, said Barbara Lambrecht, analyst at Commerzbank. If oil inventories were to drop again for the first time in four weeks, this should drive oil prices. 

Key Quotes

“While the two-month decline on the oil market appears to be over, a real countermove has failed to materialise so far as the three energy agencies recently proved surprisingly sceptical on the medium-term outlook. For instance, the International Energy Agency not only lowered its growth forecast for oil demand next year but also turned more upbeat on the non-OPEC supply outlook at the same time. Consequently, the call on OPEC oil for 2017 was cut by 200,000 barrels per Day.”

“On the other hand, OPEC production rose to an eight-year high recently. Still, we see a decent chance that the price recovery will gain traction next week. On a positive note, speculative investors massively reduced their net long positions in recent weeks. Positions on NYMEX (WTI) are barely any higher than during the low at the start of the year. Reductions on ICE (Brent) were also significant, although the level is much higher there.”

“The price recovery might be triggered by shrinking US crude oil inventories. In the past three weeks, inventories had increased, contrary to the usual summer trend. This was due to high imports and falling capacity utilisation as gasoline inventories are currently weighing on margins. A (temporary) slight widening of margins in early August and the recent drop in gasoline inventories are likely to have boosted refinery processing.”