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Oil Weekly: Bullish Sentiment Is Slowly Reversing

Apr. 04, 2018 1:07 PM ETBNO, DBO, DNO, OILK, OILX, OIL, OLO-OLD, SCO, SZOXF, UCO, OIL-OLD16 Comments
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Oleum Research


  • U.S. crude storage marginally improved week-on-week and oil rigs declined for the first time in three weeks.
  • Net speculative positioning is close to its historical high and future potential profit takers could weigh upon black gold uptrend.
  • China’s response to U.S. tariff tarnished recent oil rally and deepening trade war rhetoric could disrupt global oil demand.


Welcome to my Oil Weekly report. In this report, I analyze recent changes in oil inventories, based on the Energy Information Administration (EIA) estimates and net speculative positioning fluctuations provided by the Commodity Futures Trading Commission (CFTC). Then, I explore key global market and oil market developments to assess the impacts on the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL).

Crude and petroleum stocks

According to latest EIA report, U.S. crude inventories posted a marginal build, up 0.38% (w/w) to 429.93m barrels on the Mar 16-23 period, following a surprising drawdown the prior week, whereas Cushing storage posted a healthy acceleration up 6.13% (w/w) to 31.23 m barrels. Although, the U.S. recently became the second largest crude exporter, domestic storage establishes slightly below the 5-year average, which is bullish for OIL shares.

During the week, the five-year U.S. crude oil storage spread accelerated to 6927.44k barrels, indicating that the U.S. oil market is moving slightly more toward an oversupply structure.

Source: CFTC

On the refined products side, inventories dropped for the fourth consecutive week. Gasoline storage slipped 1.43% to 239.6m barrels, whereas distillates dropped 1.59% to 129m barrels. Refinery utilization rates continued to increase and establishing at the upper range of the 5-year average or 92.3%, amid recent oil price rally.

Meanwhile, net imports posted a healthy increase, up 19.37% to 6.57m barrels, following declining inventory buildup and was marginally offset by U.S. export increase, up 0.32% to 1.58m barrels.

Source: EIA

On March 16-23 reported period, U.S. oil production was marginally up 0.25% (w/w) to 10.43m barrels and General Electric's Baker Hughes energy services firm announced that the number of drilling rigs declined by two to 993 last week. This has been the first fall in three weeks and might provide slight support for OIL going forward.

This article was written by

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