Oil Higher On Bullish EIA Report

Inventories Rise Despite API Report

Its been another solid week for crude oil which was driven higher again by a bullish report from the Energy Information Administration.

There had been some jitters earlier in the week due to a release from the API. This reported an unexpected build in US crude inventories last week.

However, the headline report from the EIA showed that in the week ending December 13th, US crude stocks were lower by 1.1 million barrels.

This was not as low as the 2.5 million barrels decrease expected in light of the inventory build reported by the API a day earlier. However, the market was clearly relieved, particularly on the back of an 800K barrel build over the prior month.

Gasoline Inventories Higher

The latest data from the EIA also showed that US gasoline inventories were higher by 2.5 million barrels. This extended gains from the prior week’s increase of 5.4 million barrels.

Gasoline production was notably higher over the week also, averaging 9.8 million barrels per day.

The report also showed that distillate fuel supplies, including heating oil and diesel, were higher by 1.5 million barrels. This figure marked a further extension from the prior week’s 4.1 million barrels. A production rate of 5.2 million barrels per day on average is what drove the result.

Elsewhere in the report, refinery processing rates held steady at 16.6 million barrels per day. Meanwhile, imports were slightly lower at 6.6 million barrels per day. This was down from 6.9 million barrels per day.

Tide Turning Positive For Crude

This latest report from the EIA comes amidst a backdrop of much more positive expectations among oil traders. The news that the US and China have agreed a phase one trade deal has significantly lifted the outlook for crude demand.

The trade war between the two leading global economies has been a major source of negative pressure for crude prices this year. With the phase-one trade deal complete, the two sides are due to start negotiations on the second phase soon after the turn of the year.

OPEC will be especially welcoming of the news. The oil cartel recently announced that it was increasing the level of its production cuts from 1.2 million barrels per day to 1.7 million barrels per day.

OPEC has cited the trade war as one of the main issues, along with rising US crude production, as the reason behind its production cuts. The cuts are still due to run until the end of Q1 2020 currently.

Technical Perspective

Crude prices are continuing to rally higher here with price holding above the 60 level for now. This region marked the top of the range which has framed the majority of price action over the last six months. Above here, focus is on a further push higher to test the 62.46 level next if price can break above the bearish trend line from 2019 highs which is currently being tested.