- Crude oil inventories is expected to show a draw for the fourth consecutive week, around -2.7M.
- Distillates inventories could go either way. Forecasts are calling for a small draw of -0.1M.
- Gasoline inventories is expected to show a draw of roughly -0.9M.
In our recent previews we have observed that any inventory data showing larger than expected draws have limited upside compared to the moves in crude when the data shows smaller than expected draws or inventory builds. The API data earlier showed a much larger than expected draw in crude stocks. Consistent with recent impacts from inventory data (EIA and API) the move was smaller than expected considering the surprise.
Last week's impact (prior impacts in earlier posts)
Again, a surprise draw triggered a spike but with no follow through, as you might expect with a deviation as large as it was.
This data always has the potential to trigger large moves in oil. However, recently we've seen that the risk associated with this event is in a surprise build, or possibly a lower than expected draw. In that scenario, crude prices will drop. The extent of the decline in prices depends on the deviation from forecasts. Remember all three inventory numbers have the potential to trigger high impact moves across crude, heating oil, and gasoline.
I'd recommend monitoring for any inventory that could send crude prices lower. With the recent gains, it could be over extended. Data that triggers selling could have significant follow through. The safest play is probably waiting until a trend or sentiment emerges. Avoid any knee-jerk reactions.
As always, caution is advised.