Slightly higher US oil production leads to disillusion

Yesterday's US inventory report caused oil prices to fall by a good $2 in the late course of trading. After all, the decline in crude oil stocks should really have suggested higher prices given that it totalled nearly 2 million barrels despite a significant fall in capacity utilization, and as such was higher than had been anticipated, notes Commerzbank. 

Any increase in gasoline stocks, which might perhaps have weighed on prices, is of little relevance now that the summer driving season has come to an end. Instead, the focus is shifting to distillate stocks as the heating season approaches. That said, they have likewise fallen surprisingly sharply on the back of robust demand, which should also have lent support to prices. 

The slight week-on-week increase in US crude oil production is doubtless to blame for them coming under pressure nonetheless. This presumably came as a disappointment in particular to those market participants who had been betting on a faster reduction of the oversupply given all the previous reports of declining drilling activity. Although not every detail of the weekly report always fits, however, the overall picture remains unchanged: the market is oversupplied at the current edge, which will be alleviated in the medium term by a reduction in US oil output, says Commerzbank.