Unexpected sharp decline in US crude oil stocks lent buoyancy to oil prices

Oil prices gained yesterday following the heavy losses of the preceding days, though Brent's recovery was very modest at only a good 1%. WTI gained somewhat more strongly, namely by just shy of 3%. Oil prices are continuing their recovery this morning: Brent has risen to $43.5 per barrel and WTI to $39.5 per barrel. The 6½-year lows seen at the beginning of this week remain within spitting distance, however. After close of trading yesterday, the API reported a surprisingly pronounced 7.3 million barrel decline in US crude oil stocks last week, notes Commerzbank. This has lent buoyancy to prices today because a slight inventory build had been anticipated. 

The US Department of Energy will be publishing the official inventory data this afternoon. Following the API figures from yesterday, there is considerable downside potential for the market expectation. A higher rate of crude oil processing again would support an inventory reduction, as would a further decline in oil production. Crude oil output has already fallen in five out of the past six weeks. What is more, imports are likely to drop back from their extremely high level of the preceding week, which likewise suggests a reduction in stocks. It is therefore perfectly possible that WTI will regain the $40 per barrel mark and that Brent will climb towards the $45 per barrel mark, says Commerzbank. Having said that, any more marked price recovery is unlikely in view of the amply supplied oil market and Iran's announcement that it will step up its oil production once sanctions are lifted, regardless of the price level.