UPDATE: EIA report sees crude stocks fall

Ole Hansen

Head of Commodity Strategy

EIA Report Update: Crude oil stocks dropped in line with the American Petroleum Institute figures due to a 1.1m barrel/day net decline in imports. Production hit a record 11m b/d due to a continued ramp-up in shale oil production. Gasoline stocks rose as refinery demand slowed and net-import rose.

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Both Brent and WTI crude oil continue their steady ascent following the firm rejection at the 200-day moving average last week. The rally is supported by a weaker dollar, which has supported a recovery in emerging market stocks and bonds , thereby reducing some of the EM oil demand worries that supported the recent weakness.

WTI crude is potentially on track to recover back towards the centre of the current range between $68.60 and $69.90/barrel.
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Source: Saxo Bank
Focus has returned to Iran where the drop in supply is well under way and likely to accelerate over the coming months as US sanctions increasingly force customers to look for supplies elsewhere. As Iran’s ability to export drops, the anti-US rhetoric from Tehran is likely to increase thereby also raising some concerns about the stability in the region. 

“Iran says Israel, U.S. will be targeted if Washington attacks” is the headline from this Reuters article quoting a senior Iranian cleric.   

Tanker tracking data from Platts show that Iran’s crude oil exports have fallen sharply during the first half of August. During this time they saw 1.68 million b/d being exported, some 640,000 b/d below the average for July. This will undoubtedly raise pressure on the remaining Opec members and also raise the question whether they will be able to meet the potential shortfall – not only from Iran but also from Venezuela which continues to deteriorate. 

Also driving the market higher today is speculation that the Weekly Petroleum Status Report from the US Energy Information Administration due at 14:30 GMT may show a bigger than expected drop in crude stocks. This comes after API reported a 5.2 million barrel drop in US crude stocks. 

Estimating weekly crude stocks has become increasingly difficult following the rise in US exports during the past couple of years. This seems to have increased the volatility in the weekly net import figure and it is here we normally find the main reason for a discrepancy. 
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