Crude oil lower after stocks report, but equities hold the key Crude oil lower after stocks report, but equities hold the key Crude oil lower after stocks report, but equities hold the key

Crude oil lower after stocks report, but equities hold the key

Ole Hansen

Head of Commodity Strategy

Summary:  The latest EIA data led to some profit-taking in energy, but equity markets hold the key to crude oil's direction from here.


The Weekly Petroleum Status Report from the US Energy Information Administration came out yesterday, helping to trigger some mild profit-taking with supplies of oil and particularly fuel products outpacing demand for a third consecutive week. While only telling a part of the global energy story these weekly data, given their frequency and accuracy, nevertheless attract a great deal of attention and help provide inspiration for traders and algo-driven trade strategies. 

The key takeaways were:

Crude oil production hit a new record of 11.9 million barrels/day.

Crude and product stocks rose 5 million barrels to 1.26 billion, some 63 million barrels above the seasonal average.  

Gasoline stocks hitting a seasonal record with refinery cracks getting hit as a result.

Net imports dropped by 1.2 million b/d due to daily exports of nearly 3 million barrels.

 
EIA Petroleum Status Report
Charts

With the Opec+ group of nations doing their best to curb supply the demand side remains the key area of uncertainty. Consequently, the main focus and price driver at this stage remains macro-economic developments as seen through the performances of stocks and corporate bond yields. According to our calculations, the 30-day rolling correlation between WTI crude oil and the S&P 500 future is currently at its highest since 2011. On that basis, watch stock market developments more than anything else at this stage.

Correlations
Later today, Opec will release its Monthly Oil Market Report. The update is freely available and can be downloaded here. During the past three months they held 2019 Non-Opec supply growth relatively steady at 2.18 million b/d while global oil demand growth saw a small downgrade of 100,000 barrels/day to 1.29 million b/d – somewhat lower than the EIA which in its Short Term Energy Outlook on Tuesday saw oil demand rise by 1.54 million b/d this year.

The International Energy Agency will release its Oil Market Report on Friday. In terms of price developments, not a lot has happened during the past week. WTI and Brent crude have both settled into their November to December consolidation ranges which for WTI is between $50 and $55/b as per the chart below.
Crude oil
Source: Saxo Bank
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.