API Reports Slowing in Crude Inventories

The most recent release coming from the American Petroleum Institute (API) weekly inventory data reported a rise of 1.4 million barrels for last week. On the trail of a huge 12.1 million barrel draw in the week before, market analysts had forecasted a larger rise of over 4 million barrels. A significant build in inventories was expected especially after last week's data was affected by the impact of hurricane Hermine, which kept crude stocks from being taken to their storage facilities.

The lesser than forecasted build will weaken the near term sentiment for crude, worries surrounding over supply will however continue to affect the overall market trend.

Gasoline stocks were also reported lower with 2.4 million barrels which follows the draw of 2.3 million seen last week. A heavy rise of 5.3 million barrels was reported for distillates after last week's 0.9 million build.

The latest Genscape data marginally overshot their estimates for Cushing as the item experienced a 1.1 million barrel draw.

Today at 10:30 am EST, the EIA is scheduled to release their official figures, and the market's attention will be fully fixed on the outcome to see whether the API data will hold. In the moments after the API release, crude prices experience an increase in volatility due to mixed reactions to the report and this volatility is expected to continue. The EIA had revealed in their last report that US commercial crude oil inventories had fallen by 14.5 million barrels during the week that ended on the 2nd of September. This was about 2.5 million more than the API had forecasted in the previous day, this is a major reason why analysts will be watching today's figure closely

The EIA data last week revealed that API had earlier reported gasoline draw numbers lower than the official figures. On 7 September, the API reported a 2.388-million-barrel draw on gasoline stocks, while the EIA came back with a 4.2-million-barrel draw.

Oil prices have again been subjected to volatile trading this week, with a Monday WTI peak to just below $46.50 p/b that reversed on Tuesday as prices dipped back to the $45.0 p/b area. Prices came under fresh selling pressure following the latest International Energy Agency (IEA) report which forecast that the crude market will remain over-supplied until at least mid 2017 due to the impact of higher than expected non-OPEC output and slower than expected demand growth due to weakness in China and India.

The latest IEA data also recorded that Saudi Arabia has overtaken the US as the largest global producer. The Energy Information Administration (EIA) forecast that US shale output would continue to decline in October.

Gasoline inventories will remain an important influence with some hopes that a faster pace of inventory reductions over the past few weeks means that refineries have already adjusted operating rates to curb excess supply. WTI moved higher following the data to$45.35 from $45.05 ahead of the data, but prices reverted quickly to unchanged in choppy trading before consolidating around $45.25.