More Bad News for The Crude Oil Market

Last week, the U.S. Energy Information Administration (EIA) weekly petroleum status report delivered more bad news to the crude oil market, but the EiA’s long-term outlook most likely set the tone for a bearish market into the end of the year.

The weekly report showed U.S. commercial crude inventories increased by 1.4 million barrels in the week-ended August 8. This came as a surprise to traders who had priced in a 0.8 million barrel decline. Total U.S. commercial crude inventory rose to 367 million barrels, putting it above the upper limit of the five-year range for this time of the year.

Total gasoline inventories which helped give crude oil a slight boost last week, declined by 1.2 million barrels the week-ended August 8. This didn’t help gasoline or crude oil prices this week because Total Motor Gasoline supplied which represents the EIA’s measure of consumption, averaged more than 9 million barrels a day in the past four weeks. This was a drop of about 1.3% compared with the same period a year ago.

The previous week’s gasoline consumption data was friendly because it indicated greater consumer demand, but this week’s data shows that a trend did not form, setting up the market for further downside pressure. Coupled with the shutdown of some refineries for maintenance, this should’ve created a bullish gasoline/bearish crude oil scenario which doesn’t seem to be forming.

Slackening demand for gasoline may…