Oil Gains Capped By Burgeoning Global Supplies

In an unsurprising sign, US crude oil inventories grew for a third straight week and four of the last five periods according to figures released by the Energy Information Administration on Wednesday.  US stockpiles rose by 2.840 million barrels, beating expectations of 2.815 million and the prior week’s reading of 2.347 million.  Meanwhile, in a sign that the growing number of active US drill rigs is adding to upside in production, output rose to 8.961 million barrels per day last week in a sign that US production will continue to trend higher over the coming months.

Besides crude oil, gasoline stockpiles continued to rise, with supplies now 3.40% above level reported a year earlier.  However, the more concerning development is falling demand which contracted by 3.62% over the last four weeks.  After slipping on the news, WTI futures have managed to retake the $53.00 per barrel level.

In a sign that investors are growing increasingly positive about the outlook for the American economy, the Dow Jones Industrial Average rose above the 20,000 mark for the first time, reaching a record high and closing above the key psychological level.  The surge in US equities has also lifted benchmarks across the globe, with Asian stocks rising overnight, mirroring the gains in US index futures.

Although promises of tax cuts and economic stimulus have helped bolster investor optimism, there are some concerning signs on the horizon as company insider selling accelerates.  Furthermore, the heightened pace of outflows from funds that track US stocks could be viewed as a worrying sign.  Per the Investment Company Institute (ICI), investors continued to reduce exposure to US stocks, cutting positions by $3.7 billion last week.  In the meantime, Dow futures remain on the upswing, extending a climb from the last two sessions.