Significant Crude Oil Inventory Draw Predicted: oil price keeps rising

API Inventory draw

 

The API, American Petroleum Institute, in its latest forecast, indicates a significant crude oil draw for the week ending June 10. The same from the EIA, the US Energy Information Administration, is yet to be released for the same period.

The API figure, 8.573 million barrels, is more than twice what the analysts were expecting for the same period – 3.29 million barrels.

Although the forecasts by the analysts and the API used to diverge somewhat occasionally, in the previous week the figures came very close; the forecasts by the API and those of the EIA too used to diverge from each other on some occasions.

The inventory draws by the EIA in the recent past clearly show that the demand of crude oil is on the rise steadily; its consistency may have given fresh hopes for the beleaguered oil producers to be back in the business with a high degree of certainty, having been battered for months due to falling oil price.

The cumulative draw of US crude oil inventories stand at 22 million barrels since the beginning of this year.

A weekly inventory draw of this size, over 8 million barrels, will definitely clear the fog of uncertainty surrounding the Iran’s possible entry into the crude oil markets; the signatories to the JCPOA, 2015 Iran nuclear deal, are currently having their sixth rounds of talks in Vienna, Austria, in order to hammer out a deal; the signals that come in dribs and drabs have been mixed so far, mimicking a buoy in the high seas – fluctuating between hope and despair.

The success of vaccine rollout, both in the US and Europe, has strengthened the positive sentiments in the market without letting the latter being eclipsed by random outbreaks. The past experiences show they are manageable with short lockdowns and intense social-distancing measures.

The market sentiment got yet another boost this week as India reported that the Coronavirus infections are on decline – for two successive weeks.

The price of crude oil suffered when India, the third largest consumer of the commodity, suffered a devastating second wave of the pandemic. The authorities, however, have learned the lessons and are preparing themselves for a potential third wave – with more forward planning this time, without any room for misplaced complacency.

All in all, the mood in the crude oil markets is infectiously positive at present, provided that the outcome from the talks on the JCPOA in Vienna does not spoil the party!

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