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 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.
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.
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.