EIA Reports Promote a Short Rally for Crude Oil
By Daisy Joseph
The prices of crude oil have not increased as much as expected mainly because of the increase in the inventory. The EIA report was much awaited as investors waited to know whether the supply is in excess. The recent EIA report showed that the crude oil inventories reduced by 3.6 million barrels to reach a total of 528.7 million barrels. The reduction in crude inventories is mainly due to the increased refinery output.
This took the market by surprise because the previous EIA report wasn’t supporting. Crude oil price went up after the release of the report and the short covering rally is expected to prolong for the day. When the American Petroleum Institute reported that the inventory stocks continue to build up, investors bet on oil in the wrong way. The recent surge in price is also due to the investor sentiment.
There is no chance of a huge rally of crude oil prices mainly because the distillate and gasoline stockpiles continue to increase. The imports and production by the USA also increase, which means that the crude oil inventory won’t face shortage in the upcoming weeks.
The refining capacity of the oil refineries increased to 94.1%, which is the highest since the end of 2015. The market is gearing up for increased demand during the upcoming summer months. However, the low demand and huge gasoline inventory means that the crude oil inventory will continue to stay at elevated levels. Investors realize that reduction in IPEC cuts won’t be helpful in reducing crude oil supply in the market.
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