The Brent oil price experienced a sharp decline to a monthly low of USD 83.5 per barrel due to the weak Chinese data at the beginning of the week. This drop caused significant concern among investors and analysts, triggering a flurry of market activity. However, to the surprise of many, the price quickly rebounded, catching the attention of Commerzbank’s commodity strategist Carsten Fritsch.
As the week progressed, the time spreads of the Brent forward curve began to widen, indicating a growing disparity in the availability of oil for immediate purchase. This widening spread resulted in a notable price premium for oil that could be obtained on short notice, signaling a tightening of the oil market. The implications of this shift were further corroborated by the weekly inventory data released by both the American Petroleum Institute and the US Department of Energy.
The latest data from the DOE revealed an unexpected and sharp decline of 4.9 million barrels in US crude oil inventories during the previous reporting week. This marked the third consecutive weekly decrease in inventories, raising questions about the sustainability of current supply levels. The API also reported a reduction in crude oil stocks, albeit to a lesser extent at 4.4 million barrels. However, the picture was not entirely bleak, as gasoline and middle distillates experienced unexpected stock builds of 3.3 million and 3.5 million barrels, respectively.
While net crude oil imports saw a slight increase compared to the previous week, crude oil processing dipped marginally but remained high at just under 17 million barrels per day. This consistent processing level indicated a continued demand for crude oil despite the fluctuations in inventory levels. Interestingly, there was a noticeable decline in gasoline demand, with consumption dropping by approximately 600 thousand barrels per day compared to the previous week, falling below 8.8 million barrels per day.
The interplay between Chinese data, market dynamics, and inventory trends has highlighted the fragility and complexity of the oil market. With prices reacting swiftly to external factors and supply-demand dynamics constantly evolving, investors and industry stakeholders must remain vigilant and adaptable in navigating this volatile landscape.