US crude oil stocks expected to drop for 7th consecutive week

Oil prices are beginning trading largely unchanged today. Brent is priced at $63.7 per barrel and WTI at $60 per barrel. Prices were given buoyancy yesterday by a tropical storm that made landfall on the Texan Gulf Coast. Just what effect the storm has had will only be visible from this week's inventory data, which will be published in a week's time. 

The reduction in refinery activity due to the storm is likely to contribute to an oil product inventory reduction, as roughly half of all US refinery capacities are located on the US Gulf Coast, according to Commerzbank. 

The impact on crude oil is not obvious: although the lower rate of crude oil processing would suggest an inventory build, this could be offset by lower imports. The Houston Ship Channel - a key shipping route - was for example closed to shipping on Monday. In the evening, the API reported that US crude oil and gasoline stocks had last week fallen by 2.9 million barrels each, which exceeded expectations, added Commerzbank. 

An inventory build was seen at Cushing, on the other hand. The US Department of Energy will be publishing the official inventory data this afternoon, which are expected to show the seventh consecutive weekly decrease in US crude oil stocks. If this turns out to be of a similarly high level to that reported by the API, it would lend support to oil prices. 

However, this will also depend on whether gasoline stocks have fallen further. Crude oil production is unlikely to have risen again, anticipate Commerzbank. A renewed increase in production could give rise to disappointment and weigh on prices.