Selling Crude Oil on Major EIA Inventory Buildup

Posted Friday, February 24, 2023 by
Skerdian Meta • 2 min read

The mood in markets was positive initially yesterday but then turned negative after the US Q4 GDP revisions were released. That didn’t affect crude Oil much, as it ended up having a decent bullish day, coming from a bearish day on Wednesday. On Wednesday we saw a large buildup in private API inventories, so the EIA crude oil stocks are anticipated to build even further on last week’s sizeable increase in oil storage.

There has been a considerable uplift in oil stock builds since the start of November 2022 which may be symptomatic of lower oil demand as the Fed continues to restrict financial conditions into the second half of the year. We have seen a decent uplift in Oil inventories since the start of November last year, which might be a sign of lower Oil demand, with the FED continuing to restrict financial conditions into the second half of 2022. We decided to open a sell Oil signal yesterday at the 20 SMA (gray) after the retreat.

Weekly US oil inventory data

Weekly US oil inventories +7,648K vs +2,083K expected
Prior week buildup was +16,283K
Gasoline -1,856K vs +2,317K
Distillates 2,698K vs -1,285K
Refinery utilization -0.6% vs -0.2% expected

Here were the API numbers, which undoubtedly leaked:

Crude +9,895K
Gasoline +894K
Distillates +1,374K

WTI crude oil was trading at $75.54 ahead of the release and was little moved on the headline on the kneejerk, which shows that the numbers weren’t much of a surprise. Here is implied demand for all products from Giovanni Staunovo, which well-below last year, though the numbers were revised much higher in the summer and late last year when the monthly data was released.

Meanwhile, analysts expect the demand for Oil to pick up in China and lead to record imports this year, which has curbed the decline in Oil prices, with the low still holding above $70 in the US WTI crude. The move in sentiment and the USD hasn’t affected Oil much either, which means that Oil is doing its own thing and not following financial markets.