Crude Oil Outlook
If you read the crude oil news on January 29, the day that crude oil bottomed, you’ll notice that much of the credit for the closing price reversal bottom on that day was attributed to upbeat economic data from the U.S., namely a better-than-expected first-time claims for unemployment benefits. Apparently, this ignited hopes of growth in demand for oil.
It also came on the day that the Federal Reserve’s monetary policy committee announced that it would leave interest rates unchanged while reiterating its pledge to remain patient in its efforts to normalize monetary policy. The Fed also issued a solid assessment of the economy. Once again, the news pointed to the possibility of increased demand.
Both news events occurred the day after the Energy Information Administration showed in its weekly crude oil report that stockpiles in the U.S. surged more than expected the previous week. According to these figures, inventories had reached an 80-year high. The report showed that U.S. crude oil stocks rose by 8.9 million barrels that week to a record 406.73 million barrels.
If you put these events together, one would have to conclude that the news writers believe that demand is going to stabilize the oil market and trigger a rise in prices, but in reality, we all know that the sell-off in the market has been driven by excessive supply. Demand is a very small part of the equation at this point. This is another reason why as a serious…