Worries about OPEC’s latest production decision due on June 5 overrode the potential bullishness of this week’s U.S. Energy Information Administration report. The EIA report showed that U.S. stockpiles fell for a fifth consecutive week, but this didn’t seem to excite buyers enough to challenge the recent top at $63.62.
The problem is essentially the pace of the weekly drawdowns. Traders may also be having trouble with the total inventory figure of 477.4 which is hovering near an 80-year high. According to the EIA, crude inventories fell 1.95 million barrels. This was in line with trader expectations. Inventories at Cushing, Oklahoma also fell 983,000 barrels.
Trader reaction to the report suggests they want to see a faster draw down. Losing nearly 2 million barrels represents some demand, but not nearly enough to trigger a drawdown that could produce declines comparable to the nearly 10 million barrel increases at the height of the bear market.
This week’s OPEC meeting also weighed on crude oil prices. This is because traders are pricing in the strong possibility that the cartel will reaffirm its output target of 30 million barrels per day. Although there may be a call from some producers to cut output, OPEC is likely to continue to produce about 2 million barrels per day above its target.
Late in the week, a new development helped pressure prices. Traders fear that rising bond yields in the U.S. and Germany may…