This is an impatient market unwilling to take it’s eye off a bearish narrative and this week’s build in inventory plays right in to that.
Below are a few charts to get a sense of where we are versus this same week in prior years.
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Oil, gasoline and distillate inventories are at similar levels compared to the same inventory week last year, with production quite a bit higher. By comparison, the entire price curve has shifted $6.00 lower. How is this year different?
Prior Year June through end of September Inventory Changes
Looking at inventory changes from June – September over the last 3 years, it seems as though the market is bracing for something closer to a 2015 scenario. This time last year the market was looking forward to some sort of action by OPEC. Today, the market is eyeing the END of OPEC’s production cuts.
The bearish sentiment this has created is unrelenting and easily fueled by weekly data that once again failed to provide a clear sign that the worst is behind us. In the last 2 months, total inventories have drawn-down almost 30 million barrels including this week’s build.
We are only a short time into a new era that includes the ability to export oil. It’s important to remember that the timing of exports from week to week will be volatile. History is still being fashioned. At this point the market seems unwilling to trust the noise created by the ups and downs of reported exports from one week to the next.