Oil Video 29.07.20.
Crude Inventories Decrease By 10.6 Million Barrels
EIA has just released its Weekly Petroleum Status Report which showed that crude inventories decreased by as much as 10.6 million barrels.
Yesterday’s API Crude Oil Stock Change report indicated a decrease of 6.83 million barrels so EIA data was even more encouraging.
The significant decrease in crude oil inventories was driven by a major decrease in crude oil imports which averaged 5.1 million barrels per day (bpd), down from 5.9 million bpd in the previous week.
Gasoline inventories increased by 0.7 million barrels while distillate fuel inventories increased by 0.5 million barrels.
U.S. domestic oil production remained flat at 11.1 million bpd. While current oil price levels have encouraged some production to return, it’s good to see that U.S. oil producers stay cautious about pushing more barrels into the market.
In general, this is a bullish report as crude inventories have decreased while U.S. domestic oil production stayed flat.
However, it remains to be seen whether this report will help oil gain more upside momentum since traders are worried that continued problems on the coronavirus front and potential changes in human behavior will hurt demand for oil.
The Fed May Provide Additional Support To Oil – Or Hurt Its Near-Term Perspectives
Today, global markets are focused on the upcoming Fed Interest Rate Decision and the subsequent commentary from Fed Chair Jerome Powell.
His comments may have a significant impact on the direction of the U.S. dollar, which has been under material pressure in July.
The U.S. dollar weakness is bullish for commodities because they are denominated in dollars. A decline in the value of the American currency makes them cheaper for buyers who have other currencies.
Currently, the U.S. Dollar Index is trying to settle below the important support level at 93.5. Dovish commentary from the Fed may push it to new lows which will be bullish for oil and other commodities.
However, there is a risk that the Fed will take a cautious approach, waiting for more economic data before presenting additional stimulus measures.
In this scenario, oil may find itself under significant pressure since it has already lacked momentum for the last two months, and a stronger U.S. dollar might serve as a catalyst that pushes WTI oil below the $40 level.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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