Early signs of growing demand for crude oil have prompted a market optimism that has led to increased WTI buying, setting the stage for the benchmark’s best-ever monthly performance, Bloomberg reports--even though the contract’s rally has been somewhat uneven.
According to Bloomberg, West Texas Intermediate has increased by nearly 80 percent this month--the highest increase since 1983. Still, this month’s price rise has not been enough to offset the losses that the benchmark, along with all other benchmarks, suffered in the prior three months. WTI, therefore, is still 45 percent lower than it was at the beginning of the year and lower than the breakevens many U.S. shale producers.
The immediate outlook for WTI, however, remains uncertain. For example, the Energy Information Administration, whose weekly petroleum status report is among the most closely watched indicators of the health of the oil market, yesterday reported another solid crude oil inventory build for last week. The reported build immediately weighed on the benchmark. The report followed a modest inventory draw reported for the previous week, which was embraced as one of those early signs of improving oil demand that could push prices higher.
It’s worth noting that despite the inventory draw a couple of weeks ago, total crude oil inventories in the United States continue to be above the five-year average for this time of year. Right now, they are as much as 13 percent above this average. Gasoline and distillate fuel inventories are also above the five-year average: gasoline at some 10 percent above it, and distillate fuels around 24 percent above the average.
MarketWatch noted that the surge in crude oil stockpiles last week was a result of increased Saudi imports—from that flotilla carrying 40 million barrels that media have been following for weeks—but that only accounted for about 2 million barrels of crude out of an increase of 7.9 million barrels.
This most likely means that it is too early to have any expectations for oil prices as market volatility remains extremely high.
By Irina Slav for Oilprice.com
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