- Supply disruption rally in Brent fades
- Year-end profit-taking starting to emerge
- EIA stock update and IEA report in focus
Inventory and product data are the oil market's focus today. Photo: Shutterstock
By Ole Hansen
Crude oil's roller coaster ride looks set to continue with the focus in the market alternating between pipeline disruptions, funds booking profits ahead of year-end, and the weekly dose of US inventory data.
Adding to this, we have monthly oil market reports from all the three major institutions – the Energy Information Administration, Opec, and the International Energy Agency.
The most serious supply disruption of the year lifted Brent crude to a 2½-year high yesterday before running out of steam as traders began booking profit ahead of year-end. The profit-taking occurred after the IEA said it was monitoring the closure of the Forties crude pipeline
but that no immediate need for action was required with the market currently being well supplied.
Last night the American Petroleum Institute reported a bigger-than-expected reduction in crude oil stocks for a second week in a row and this helped support the recovery seen today. A Bloomberg survey pins the crude stock draw at 2.9 million barrels, and this should be more than offset by another rise in product stocks.
Crude oil production and refinery activity, together with oil and product trade, are data which as usual will attract attention once the Weekly Petroleum Status report is out at 1530 GMT.
A decline in the open interest on the Brent crude oil future yesterday is pointing towards some year-end profit-taking after the latest leg up in prices. What part this played in yesterday's top-to-bottom move, however, will only be revealed when the Commitment of Traders report is released this Friday after the close.
In Brent crude, the uptrend from the June low remains in crude health, not least supported by the multiple supply disruptions and decline in Venezuelan production witnessed during the past three months.
After hitting a fresh 2½-year high yesterday, profit-taking took it back down to the 20-day moving average at $63/barrel which also ties in with the 61.8% retracement of the December low to high.
A break below this level could see it target a key area of support just above $61/b.
— Edited by Michael McKenna
Ole Hansen is head of commodity strategy at Saxo Bank