After reaching an intra-session high overnight at $81.50 Nymex December futures have declined in electronic trading in New York and Chicago. Nymex Light Sweet Crude futures lost almost 1% as the oil price came under pressure following worse-than-expected Japanese import data, which showed a 13% decrease for the first half of 2009 compared to last year.
Wednesday’s inventory report from the Energy Information Administration (EIA) is showed that Crude supplies rose by 1.3m barrels, which was marginally less than the anticipated 1.5m, Gasoline supplies fell by 2.2m barrels against expectations of an 850,000 barrel decline.
Following the report, Crude price rapidly spiked more than one dollar on the New York Mercantile Exchange. Nymex Light Sweet Crude futures rose from an intraday low of $77.64, the December future was last changing hands around $80.05.
It would appear that the oil price has been moving in direct response to the headline numbers, however many analysts and market commentators have keen to point out some of the detail and context of the current supply situation in the oil market. While the headline figures represent a ‘better-than-expected’ result commentators argue that they should not gloss over the challenging environment.
According to yesterday’s report US refiners supplied 3.3% less gasoline last week, a further decline from a 4% reduction from the week before. Energy Department said that they have kept offline about 19% of their refining units.
Commentators also point out that despite the decrease over the past two weeks, US supplies of refined distillates are at a 25-year high. The US currently has stockpiled more than 29m more barrels of oil than this time last year.
Additionally OPEC identified that internationally approximately 125m additional barrels of oil are currently stored in offshore tankers.
This latest supply report adds to an apparently conflicted supply outlook, which seems to vary considerably between reports and context. On Tuesday, the American Petroleum Institute revealed that crude stocks rose 3.8m barrels last week. Its weekly US oil supply report more than doubles the initial analyst forecasts.
The Organisation of Petroleum Exporting Countries (OPEC) has expressed concerns over the recent crude oil rally. Yesterday Secretary General Abdallah Salem el-Badri warned that the rise in prices was not linked to supply and demand in the oil market. Instead el-Badri identified a weak dollar and recovering equity markets as cause of the rally.
The Secretary General stated that sustained crude prices in excess of $80 per barrel would not be good for the global recovery. Several other commentators have also warned that higher crude prices will potentially curtail the emerging recovery, as higher production costs and energy prices will dampen the fragile economic growth.
According to OPEC’s el-Badri, the cartel would consider altering production levels at its December meetings depending on the oil price and the level of the ‘floating surplus’.
Its appears as though the crude oil market is finely poised between a growing investment asset for both private and institutional investors and the potential of it becoming a burden for the fledgling economic recovery.
For the remainder of the week investors will await the upcoming supply data and also remain focused on the demand picture. The American company reporting season will continue to be a key feature in the oil market for the rest of the week. The country's retailers and consumer stocks are taking their turn in the spotlight.
Last week Wall Street’s major financial companies boosted many analysts' recovery outlook. The resulting confidence in equities has directly translated into strong oil prices as analysts anticipate an improvement in demand.
On Wall Street, equities have generally traded lower, ExxonMobile (NYSE: XOM) was the only Oil & Gas stock to light up in green this morning after recovering from initial losses to trade a couple of cents higher than Wednesday. On the other hand, ConocoPhillips (NYSE: COP) was the weakest performer dropping nearly 2%.
Chevron (NYSE: CVX), Murphy Oil Corp (NYSE: MUR) and Canada based EnCana (NYSE: ECA) all fell more than three quarters of a percent. French producer Total SA (NYSE: TOT) was more robust, as it eased slightly dropping around one third of a percent.