Sterling has been blasted lower after BoE governor Carney cast doubt on a previously pretty-much-expected UK May rate hike. The EU's rejection of Britain's latest Brexit-Irish border plan only served to deepen the rot.
Article / 29 June 2016 at 14:11 GMT

Crude oil left Brexit behind to focus on own fundamentals

Head of Commodity Strategy / Saxo Bank
  • Key resistance is once again at $50/b
  • Oil inventories expected to fall by 2.5m barrels
  • Keep an eye on weekly production estimates
 These storage facilities should be somewhat emptier. Photo: iStock

By Ole Hansen

The Brexit shock last Friday triggered risk reduction across most asset classes including crude oil with WTI tumbling 7.5% up until Monday. Since then a weaker dollar and a general recovery have seen traders once again turn their attention to oil's own fundamentals, not least the weekly inventory report from the EIA.

After managing to hold $45.83/b and thereby creating a double bottom in the market WTI crude has recovered strongly with key resistance once again found at $50/barrel.
WTI crude oil, first month cont.
 Source: Bloomberg

US oil inventories probably fell in the region of 2.5 million barrels last week according to a Bloomberg survey. Other data to look out for are the weekly production estimates which have seen an almost continuous decline for the past five months. 

Gasoline demand and inventories combined with refinery activity make up the other key component of the report.
DOE data
In this interview today from the Bloomberg's Oil Buyers Guide i set out some of my thoughts about oil in the aftermath of Brexit and where I see it go next. 

The EIA report is due 1420 GMT. Click here to see main features.

Comments about the inventory data will be posted below once released.

– Edited by Clare MacCarthy

Ole Hansen is head of commodity strategy at Saxo Bank. His Twitter account was cited by MarketWatch as one that investors should follow in 2016.

Ole Hansen Ole Hansen
EIA result
John Roberti John Roberti
dear Ole, gasoline Consumption is declining, import's are declining exports moving up, production is declining slightly by 50MB/D and the market seems to believe this is bad for oil market and prices are going up! I am a bit at a loss with this reaction? Could you explain what I am missing?
Ole Hansen Ole Hansen
Just looking at inventories and production estimates this report is bullish for crude oil considering the bigger than expected decline. The bigger than exp. inventory drop was partly the result of weaker imports (-884k b/d). Gasoline inventories remain a concern once again rising against seasonal expectations
Ole Hansen Ole Hansen
John. The production decline and inventory rise triggered the initial reaction but considering how the inventory drop was achieved i could see oil struggle to make much more out of this. Also considering the strong come-back since Monday.
John Roberti John Roberti
thanks Ole, in fact, prices appear to stabilize now at least! Let's see what they will do later. It appeared a few times already that the market digests the figures with some delays pertly due to the frequent bad information from API the day earlier...?


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