|Previous||1.6 million barrels|
|Forecast||1.1 million barrels|
|Analysis||Crude oil declined yesterday in a two-day downside journey and it struggles today to erase some of these losses ahead of ECB’s lending operation results; mixed factors are affecting crude to show some volatility despite its current upside bias.|
Crude oil opened today’s session at $106.48 and reached a high of $107.17 and a low of $106.20, where it is currently trading around $107.04 a barrel.
Actually, this decline for crude is a normal correctional movement after crude reached very high levels around $109, where it is currently trading around $107 after it declined for two consecutive days with the start of the week.
Looking at the factors that affected crude, we can see that the American Petroleum Institute reported yesterday that U.S. oil inventories rose by 0.5 million barrels, but the distillate fuel inventories declined sharply by 3.3 million barrels; however, crude took the negative effect from this report and continued its downside movement despite the weakening dollar.
We can also take a look on the major factor behind this downside correction, which is easing pressures on Iran’s oil, as the country found a way to sneak out form U.S. sanctions which pressured the country on how they would collect oil revenue, but the country decided to accept gold instead of U.S. dollars or the importer country’s currency.
Also, the biggest importer nations for Iran’s oil, India and China, said that they will continue importing oil from Iran amid lack of sources that would cover this gap if they obeyed the U.S. and cut oil imports from Iran, unlike Korea and Japan that decided to cut their oil imports from the country after huge pressure from the United States.
Today, investors are eagerly waiting for ECB’s cheap lending results which has been called yesterday and today results will be announced with expectations to be such as the last operation with almost half a trillion euros loans to European banks.
This operation is supporting confidence in Europe as it will support the economy and open the door to companies in the economy to get loans from banks and will at the end revive the economic cycle and prevent any liquidity squeeze among banks.
After this move by the ECB, volatility may dominate again ahead of GDP data from the world’s biggest economy which is expected to maintain its growth pace in the fourth quarter at 2.8% as the first reading showed.
Also, the EIA report will be released today and may show a rise in U.S. crude inventories by 1.1 million barrels last week compared to previous reading that showed a rise by 1.6 million barrels, but the API report yesterday showed signs that inventories may miss the expectations.