Oil Prices Run Perpendicular to Data

Market Trends - 28/10/2015

In a testament to the unpredictability of crude oil and amidst a tremor in commodities as whole and anticipation of the FOMC’s interest rate decision, a 4% rise in oil was seen within the last two hours alone alongside a report from the Energy Information Administration. Confusingly, the movements during this report are contradictory to the published results, which show continual oversupply and a recent boom in oil inventory. The supply and demand equation should push oil prices down, especially given the strong numbers and trend, outlining the fifth straight week of inventory gains, the latest deposit of which was an astounding 3.376 million barrels. The other side of the equation should have the same results, yet a reported increase in US production, which has slid down almost nonstop in the last few weeks had no effect. US productions increased 16,000 barrels since the last print in the face of expectations that price competition would have US production crumbling.

Some see this surprising bounce in crude oil an indication that the market is getting healthier, but others have subscribed to the theory that recent drawdowns in the Cushing, Oklahoma storage facility are the impetus for this price movement. Statistics out of Cushing illustrate an uptick in capacity a small period before the official announcement, yet final figures showed a 785,000 barrel drawdown. The cleanliness of the data remains in question, as does the notion that some market participants may have had a forward glimpse of the true numbers. At just 14:00 GMT a high volume was seen when compared to the time of the announcement, so caution must still be taken before traders try and follow a short upwards trend. Supply, demand, manufacturing and production indicate that downward pressure remains as strong as ever in the sector, and the latest momentum upwards may be simply a fluke.


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