Hurricane Harvey submerged another massive drawdown in the official U.S. Crude Inventories last night, washing Brent by two percent in the process. The reduction came in at -5.4 million barrels against an expected 1.75 million drawdown. It continues the trend of falling oil in storage in the U.S. The data, however, was collected pre-Harvey and with fully 25% of the U.S. refining capacity offline, the stress is being felt in refined downstream products with gasoline process hitting two-year highs. Next week’s inventory numbers, should the data even be able to be collected, will likely show a substantial increase as crude pumped out of the ground searches for a refinery home to go to that isn’t under water.
Brent spot fell from 51.75 to 50.75, trading in Asia a smidgeon higher at 50.85 this morning. It has broken a rising trend line support at 51.10 in the process which becomes intraday resistance. Must hold support now is a triple bottom at 49.90 with a daily close implying a deeper correction is possible to the 47.00 area. Until this line is broken, however, the technical picture remains that Brent is in a long term consolidation of its past month's gains.
WTI spot, by contrast, fell only 50 cents overnight from 46.20 to 45.70, opening in Asia at 45.80. The relative outperformance versus Brent could be due to a couple of factors. Firstly, a lot of Hurricane Harvey bad news is now built into the price against a background of lower inventories anyway. Secondly, with the premium of Brent over WTI having moved to multi-year highs, traders may have been tempted to sell Brent and buy WTI to take advantage of this.
WTI spot has support at the 45.00 area and resistance at 47.00, but will most likely trade of Harvey headlines and spread traders.