By Orbex

Inventories Surge

Crude oil prices made moves in both directions this week. However, despite another bearish update from the Energy Information Administration, crude is higher on the week as of writing.

In its latest report covering the week ending November 1^st, the EIA reported US crude stores higher by just shy of 8 million barrels. This figure was wildly higher than the projected 1.5 million barrel increase forecast in a Reuters poll ahead of the release.

Refinery Runs Lower

The data showed that refinery crude runs were lower by 237k barrels per day. Refinery utilization rates dropped 1.7% to 86% of total capacity.

This decrease in utilization has been one of the big contributing factors to the large surplus in inventories last week.

Gasoline & Distillate Stocks Falls

Elsewhere, the report was not so bearish. Gasoline stocks were lower for a sixth consecutive week, falling 2.8 million barrels over the week. This decline far exceeded analyst expectations of a 1.8 million barrel drop.

Similarly, distillate stockpiles, which include heating oil and diesel, were also lower by 622k barrels. However, this was slightly less than the projected 949k barrel drop.

The overall level of distillate inventories has now dropped to 119.1 million barrels. This is its lowest level since June 2018.

Exports Tanks, Imports Higher

Looking at import/export data next, net US crude imports were higher last week by 336k barrels per day. Meanwhile, exports dropped by a massive 1 million barrels per day to hit 2.4 million barrels per day.

This significant fall in exports, accompanied by a surge in imports, is also a main contributing factor to the surge in inventory levels last week.

Keystone Pipeline Outage to Cause Supply Disruptions

The level of inventory at the Cushing delivery hub in Oklahoma, the largest of its kind in the US, came in higher by 1.7 million barrels last week.

Inventory levels have now risen at the site for five consecutive weeks.

However, looking ahead, this dynamic could shift. The closure of the Keystone pipeline, as well as an oil spill in North Dakota, are set to take impact as of next week.

The Keystone Pipeline accounts for roughly 590k barrels per day, Therefore, a loss of this supply is would have a major impact.

US-China Trade Talks in Focus

Concern for the supply/demand balance in crude continues to be a major factor in determining the outlook for oil prices. The ongoing US-China trade talks hold the potential to fuel a recovery in crude prices.

However, progress has been slow. While commentary has become more supportive recently, a deal is yet to be signed.

If the US and China do sign a preliminary deal this month and talks progress, this could stoke the fires of demand once again in crude.

OPEC Lowers Global Oil Demand Outlook

Despite optimism over the trade talks, in its latest World Oil Outlook, OPEC has once again lowered its demand forecasts. It cited a weaker global economy and a shift towards natural gas as the reason for this.

Over the next four years, OPEC projects that crude demand will decline by around 7% to an average of 32.7 million barrels per day by 2023.

This latest bearish forecast from OPEC is once again fuelling speculation that the group will announce further measures when it meets next in December.

Technical Perspective

The rally in crude prices this week has seen price moving firmly above the 55-level to challenge 57.78, which is so far holding as resistance.

While above 55, focus remains on a further push higher with an eventual break of 57.78 on watch. Crude has been roughly trapped within the 50.85 – 57.78 range for the last six months and a break above 57.78 will put focus on a test of the bearish trend line from year to date highs along with the next structural resistance around 60.35.

If we break back below 55, however, the bottom of the range at 50.85 will become the next focus point.

By Orbex