Image credit: Global Risk Management

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Since the U.S. inflation data and crude inventory stats were released yesterday, the Brent oil price has gone from a low of about 62 USD to about 65 USD at time of writing, which is a remarkable increase. Seems like the oil market is currently driven by the financial markets along with fundamental factors.

Following yesterday's U.S. CPI release which came out higher than expected, the stock market increased further. Brent has since the start of this month been following the stock market quite closely (they have been highly correlated), which initially dragged the price down, but now dragging it northwards.

Looking to the fundamentals: yesterday the EIA released the inventory stats which showed a build in crude stocks of 1.8 mbbl, a build in gasoline of 3.9 mbbl and a draw in distillates of 0.5 mbbl. The crude build was almost 1 mio. barrels lower than market consensus and lower than Tuesday's API data which showed a build in crude oil stocks of almost 4 mio. barrels last week. Indeed, a higher build could be expected as the refinery utilization rate fell from 92.5% to 89.8% and the weekly production of crude rose from 10.251 mbpd to 10.271 mbpd. But the build was not that high and that might have disappointed the market as these numbers indicated that demand was very strong, hence the upward trend in oil prices following the release yesterday afternoon.

It will be interesting to follow if oil is heading back into a higher trading level.

Turning to economic data, today sees initial jobless claims from the U.S., Eurozone trade balance and an ECB speech. Asia is entering the Chinese New Year and a week of celebration.