After being extremely overbought with a record amount of hedge fund and large speculators long caused a sell-off after a questionable report from the International Energy Agency’s, Traders hoping that the American Petroleum Institute weekly supply report would perhaps add some clarity only added to the confusion. In a major mixed bag of a report, the API reported massive and unexpected 6.513 million barrels increase in weekly supply.
The API in recent weeks has been reporting major drops in supply much more than the reports from the Energy Information Administration (EIA), that we get today. Is this build from the API, that was almost 6 times the build than the medium estimate corrects or is the drop an attempt to level out their total number to get in line with the more modest draws that we have been getting from EIA. We will find out today.
Yet, at the same time, the API reported much larger than expected drop of 1.803 million barrel at the Cushing Oklahoma delivery point. The big drop there means that we must have seen massive increases in supply in other oil pads or the API is just playing catch up. The wide discrepancy is raising some eyebrows.
RBOB futures lead the selloff and one reason may be increasing supply and signs the refiners are getting ahead of record U.S. gasoline demand. The API reported a larger than expected increase in gasoline of 2.399 million barrels. Demand for distillates is rocking as farmers are bringing in some record yielding crops, The API reported very largely 2,527 million barrels drop in weekly supply. The "Street Account consensus” is for crude oil to be up 700,000 barrels, Gas inventories down 130,000 and distillate inventories down 1.93 million barrels for the EIA report today.
Then you have the OPEC meeting. OPEC and Non-OPEC have stunned the world with their record-breaking compliance to cuts, but now the question is can they keep it up. Reports that Russia is questioning that an extension of cuts might be needed after NOVEMBER 3oth is probably right but misses the point. It is not whether or not they will be needed because they probably won’t, because of demand growth, but the signal it sends to the market and that is what the trade will focus on.
Bloomberg reports that OPEC Secretary-General Mohammad Barkindo says that no one in the group opposed to an extension of supply cuts but the length of cuts is the issue right now. He says that it could be as short as three months or if nine months.
Of course, the Russian’s love drama. Bloomberg says that Russian Energy Minister Alexander Novak, who met with bosses of the nation’s major oil companies in Moscow on Wednesday, has previously said that there won’t necessarily be a decision this month whether to extend the cuts. It’s hard to see if such a move is needed so long before the deal’s expiry, he said on Nov. 2. Moscow also dragged its feet at the OPEC meeting a year ago, keeping the market guessing until the last moment about whether it would join the cuts. Were wrong! Isn’t trading the weather markets fun?
Nat Gas pulled back on competing weather models. Sound familiar? The U.S. and European models can’t agree on the weather. The U.S. model says cold but the Euro model is trending warmer. Last winter both models were wrong! Isn’t trading the weather markets fun?