Image: Global Risk Management

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Yesterday, the American Petroleum Institute (API) released the weekly inventory stats which showed a build in crude of 4.85 mbbl, a draw on gasoline of 3.37 and a draw on distillates of 0.77 mbbl. However, U.S. crude inventories overall have been building during the year.

Global demand remains strong and OPEC seems compliant to the production cut deal. On top of that, re-imposing sanctions on Iran could jeopardize about half a million barrels daily unless other OPEC producers offset those barrels. Adding even more tightness in the market is the situation in Venezuela, which does not seem to improve. The U.S. shale production is, however, surging, but it appears that those many new barrels produced are having a difficult time reaching the global market. The dynamic can as well be observed by looking at the difference between the Brent price and the WTI price. Both are getting more expensive, but the Brent is becoming relatively more expensive than WTI - meaning that the difference (the so-called spread) is increasing.

The EIA is releasing the inventories stats today, but likely the build reported by the API is already priced in. Volatility around release is however expected. Also later today the International Energy Agency (IEA) will release the monthly oil market outlook.