Decline In US Oil Inventory Reported Yesterday By The Department Of Energy

The larger than expected decline in US oil inventory reported yesterday by the Department of Energy is taking credit for yesterday’s rally. National stockpiles fell by 4.7 million barrels last week, which follows the seasonal trend of moderate declines going into the holidays, however this marks the 7th consecutive week inventory levels have been below the 5-year low. The crude oil headline number seemed to overshadow the 5.5 million barrel build in gasoline stocks, which was larger than estimates but also expected this time of year. Diesel stocks added a modest 205 thousand barrels.

The two-pronged dose of positive news surrounding the Omicron variant surely didn’t hamper yesterday’s rally. Research showing the latest novel variant to have less severe symptoms (albeit much more contagious than previous iterations) has experts hopeful this may hasten the diseases progression from pandemic to endemic. The S&P 500 was up ~1% on the news.

Prompt month American natural gas futures are down nearly 5% this morning while European prices hit record highs as cold weather rolls in and Russian supply cut out. No end in sight: the latest public discourse has Putin denying the mass movement of Russian troops along the Ukrainian border while pointing the finger at the US and NATO for escalating tensions in the region.

Heating oil futures are the closest of the ‘big three’ energy contracts to completely retrace the losses suffered on Black Friday. If the $2.36 level can be reached, technicals leave the door open to a run at the $2.50 level in short order. Gasoline futures have about twice the distance to cover (about 13 cents) before it accomplishes the same feat.

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