WTI Tumbles Back Below $56 After Bigger Than Expected Crude Build

A little humor to take the edge off an ugly few days in the energy complex as traders celebrate a marginal 1% bounce after collapsing for 12 straight days...

After bouncing modestly today following oil's worst day in almost 4 years yesterday, amid fund liquidation rumors, supply glut fears (Saudi production surge) and demand concerns (global economic slowdown, cough China cough), traders could be forgiven for ignoring the small matter of tonight's API crude inventory data.

“A lot of folks threw in the towel and got as bearish as can be so now it was ripe for us to at least attempt to move back higher,” said John Kilduff, a partner at New York-based hedge fund Again Capital LLC. Signals of impending supply cuts “helped stock the bullish spirits back in here for the first time in a while.”

API

  • Crude +8.79mm (+3.2mm exp) - bigest build since Feb

  • Cushing +726k (+2.5mm exp)

  • Gasoline +188k

  • Distillates -3.224mm

This is the 8th weekly crude build (and Cushing) in a row and the biggest crude build since Feb (if it holds for tomorrow's DOE data)

WTI was hovering just above $56 ahead of the inventory data (well off the day's highs above $57), but kneejerked back to a $55 handle on the

“Yesterday’s move is just capitulation,” said Nick Gentile, managing partner of commodity trading advisor NickJen Capital Management & Consulting LLC in New York. Traders who analyze chart trends to divine future price moves are “adding to the shorts” while so-called macro traders are “liquidating longs.”

Notably, WTI's plunge (growth scare and supply glut) has coincided with relative strength in gold (growth scare, safe-haven) which erased all advantages on the year as 1 ounce of gold can once again buy around 22 barrels of WTI crude...

The rise in the gold-oil ratio comes even as gains in equities and expectations for higher interest rates hold the metal in check.

“The crude oil bull is done and gold is ready to roll,” Mike McGlone, strategist at Bloomberg Intelligence, says by phone
“At some point, gold will break out higher; it’s down on a strong dollar”

For now, some have argued that Trump is winning once again...