US oil reserves data and market reaction
According to the American Petroleum Institute (API), which came out yesterday, oil reserves in the U.S. rose by 7.6 million barrels to 526.2 million for the week ending May 8, while analysts estimated that they would grow by 4.1 million barrels. You can agree that after that to see in today's report of the Energy Information Administration of the US Department of Energy that the reserves of crude oil decreased, albeit slightly, was quite unexpected. It would seem that such information could have blown up the market. But no, we did not see it: prices jumped by 60 cents and then fell by 90.
What is it? The fact is that the oil market continues to be ahead of events. It was too optimistic when it played back the upcoming supply cuts. The sober understanding that demand will not recover to normal for a long time comes with such signs as the second wave of coronavirus in the world and Powell's reminder that the US economy is awaiting for a long period of weak growth. U.S. chief infectious disease officer Anthony Fauci told Congress Tuesday that easing restrictions could cause a new outbreak of the disease, which has already killed 80,000 Americans and seriously damaged the world's largest economy. Earlier, new outbreaks of coronavirus were recorded in South Korea and China.
This is not a supply market. This is a market for demand. One should not think that Saudi Arabia's call for OPEC+ countries to further cut oil production in order to rebalance the world markets will return prices to around 40 tomorrow. No. They will return tighter and even higher when long-term oil supply drops sharply in two years.