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ECM: Crude Oil Prices Remain Under Pressure, Traders Braced For Record Inventories
 
The much larger than expected increase in American Petroleum Institute (API) inventories undermined crude sentiment and pushed WTI prices lower with markets expecting US inventories to be at record highs in Wednesday’s data.

The latest API data recorded a much larger than expected increase in inventories of 11.6 million barrels for the week ending March 3rd compared with expectations of an increase close to 2.0 million barrels.

The data increased expectations that crude stocks would increase to fresh record highs in Wednesday’s Energy Information Administration (EIA) data.

Cushing inventories also moved higher on the week, although there was some relief in the fuel data as gasoline recorded a draw of close to 5.0 million barrels while distillate also registered a significant draw on the week.
Market reaction was driven by the headline data and WTI declined sharply to lows near $52.70 p/b from $53.10 ahead of the data.

Prices were little changed during the Asian session with crude unable to gain any support from the strength of Chinese imports for February.

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The strong dollar tone and expectations of a Fed tightening next year contributed to the underlying weak tone in crude prices.

At the US open, WTI declined further to the $52.60 area while Brent declined to below $55.50.

The EIA data will inevitably trigger further volatility on Wednesday, although markets will be braced for a substantial build and any figure close to the 2.0 million level would provide significant relief.

Nevertheless, assuming there is a significant build, inventories will have increased for nine consecutive weeks.

The latest production data will also be a key element in the data given the current focus on US shale output. The latest EIA monthly report now expects that US crude production will increase by 330,000 bpd more than expected in the previous report at 9.2 million bpd with 2018 output expected to increase to 9.7 million bpd from the previous estimate of 9.5 million.

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