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Oil Price Ticks Up After 3-Month Low but Crude Inventories Remain Heavy

After Brent crude prices touched a three-month low of $54.44 a barrel following a week of declining prices, a trend reinforced by The American Petroleum Institute’s Tuesday report on U.S. oil and gasoline inventories, this morning has seen an uptick. Brent crude was 0.1% higher on its opening position as Asian markets closed, having recovered to $55.12. By 09:45 GMT the benchmark oil standard had gained a further $50 cents a barrel to $55.62. WTI has seen a similar morning rise of $0.5 to $52.44.

The movement upwards can be considered to be somewhat at odds with additional data that yesterday came from another weekly assessment of U.S. inventories, this one provided by the U.S. Energy Information Administration, the IEA. The API’s Tuesday report showed spikes well ahead of forecast for both gasoline and crude inventories. Yesterday’s IEA data indicated an 869,000 barrel fall in gasoline inventories, against expectations for a 1.1 million rise. However, the report showed a 13.8 million barrel increase in crude oil stocks.

Goldman Sachs responded to the information with a statement that the bank still expected a gradual drain of inventories over the coming months as OPEC supply cuts bite, despite evidence that production is rising strongly in the U.S. A note to clients read:
_”We do not view the recent excess U.S. builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness. The draws that we expect will start from a high base…U.S. production has also rebounded … and we view the faster shale rebound as creating downside risk to our 2018 WTI price forecast of $55 per barrel, but not to our expectation that the global oil market will shift into deficit in 1H17.”_

Gold is meanwhile at close to a 3-month high, changing hands at $1,242.10 oz. While the Fed deciding the economy is strong enough to support a March interest rate rise in the U.S. would be likely to put downward pressure on gold prices, some analysts are now predicting upwards movement towards $1300 is also a genuine possibility. Geopolitical concerns over Greece’s debt crisis, Italy’s banking crisis, important elections in Europe and controversial Trump policies could outweigh an interest rates rise to push gold up if markets turn ‘risk off’.

About the author

John Adam
John Adam was one of the Invezz Founding Partners & Lead Editor's up until 2017. John has an unmatched breadth and depth of experience in all things investing, and we wish him the best in his pastures new.

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