Release Explanation: This is the DOE (Department of Energy) Crude Oil Inventory, EIA (Energy Information Administration) Weekly Oil Inventory. It measures changes in crude oil production, refinery inputs and utilization, production by product; current inventory level of crude and related products as well as an estimate of how many days of supply is currently available. Increasing or decreasing inventory figures leads to an adjustment of price action that in time will spread throughout the economy. Currently, it is estimated that for every one percent of GDP growth, oil consumption increases by one quarter to one third of a percent, so oil inventories must be able to increase along with the economy or another gasoline shortage may occur. It is also worth noting that at an average price of $75.00 a barrel, the U.S. spends one billion dollars a day on crude.
Crude oil price is on the same level as interest rates when it comes to its impact on the economy. It affects every release. The product is responsible for much of our trade deficit; it is used throughout the product/service cycle, and also has a significant impact on consumer spending as well as inflation. The initial affect on the U.S. dollar tends to be the inverse of oil prices. For example, higher oil price leads the greenback lower since it suggests higher trade deficits and a possible decrease on consumer spending. However, the real impact of oil prices (and inventory levels) is felt farther down the road as prices influence headline and core inflation.
Trade Desk Thoughts: According to the Energy Information Administration (EIA), U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased 0.5 million barrels from the previous week. At 321.3 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.3 million barrels last week, and are near the lower boundary of the average range. Both finished gasoline and gasoline blending components inventories increased last week.
"Demand has been slowing consistently as the economy has weakened," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "If the trend for slower energy demand continues as prices fall sharply it's a sign of severe economic stress and therefore, a further decline in overall consumption can be expected going forward."
Total products supplied over the last four-week period has averaged 19.6 million barrels per day, down by 4.9% compared to the similar period last year. As of last week, the yearly decline in demand was 6.1%. Over the last four weeks, motor gasoline demand has averaged nearly 9.0 million barrels per day, down by 2.7% from the same period last year. As of the previous week, the yearly decline in demand was 3.2%.
**Alert** OPEC Announces A 4M Barrel Per Day Cut In Output
Forex Technical Reaction: EUR/USD had been rising and USD/CAD had been falling prior to the report as crude futures remained flat. Crude fell $1.40 immediately afterwards but has since recovered to a loss of 55 cents on the day.
