Shrinking US crude reserves might confirm the trend now

Sébastien Bischeri Sunshine Profits

Oil prices rose again on Tuesday, approaching multi-year highs amid concerns over steadily shrinking US crude reserves.

Fundamental analysis

US API Weekly Crude Oil Stock:

Inventory levels of US crude oil, gasoline and distillates stocks, American Petroleum Institute (API) via Investing.

Regarding the API figures published Tuesday, the increase in crude inventories (with 2.318 million barrels versus 1.650 million barrels expected) implies weaker demand and is normally bearish for crude prices. However, we have a strongly bullish context, where the supply is still voluntarily – or not – narrowed by the OPEC+ and the global demand increases. What has to be synthesized from this report are the consecutively decreasing figures week-on-week, which are lifting prices higher.

Today, we have to see whether or not these figures will be confirmed by the weekly Energy Information Administration's (EIA) report… But there is very little doubt that they won’t be, given the current environment in which black gold is progressing.

Geopolitical context

On the international scene, a meeting between Iran and the European Union is likely to happen fairly quickly since the Iranian deputy minister in charge of the nuclear issue, Ali Bagheri, will meet with an European negotiator Enrique Mora this week in Brussels to discuss a resumption of negotiations in Vienna. There is no need to specify that if the negotiations are successful, the easing of sanctions will lead to the return of a large-volume market of black gold, which is currently under embargo.

Chart

WTI Crude Oil (CLZ21) Futures (December contract, daily chart)

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Author

Sébastien Bischeri

Sunshine Profits

Sebastien Bischeri is a former Reserve Officer in the French Armed Forces (Navy), and began his career in computer science and engineering, prior to move into banking, finance, and trading.

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