Morning Market Overview

Ahead of the start of the weekly oil inventory report cycle oil prices rallied across the complex Tuesday with the spot WTI contract approaching the highest level since the end of 2014. As we have said on numerous occasions more and more players in the oil pits are moving into the camp that believes the OPEC production cutting accord will push global inventories back to normal historical levels in a reasonable period.

With the global economy showing many signs that it is growing at a faster rate than originally projected last year oil demand growth is also likely to grow at a faster rate. A faster global oil consumption growth rate will continue to absorb the gains in US crude oil production and still maintain the destocking of global oil inventories going forward.

How long the oil complex remains in an uptrend and how high oil prices go will be directly related to how fast global inventories return to normal levels.

During the afternoon the API started the weekly inventory report cycle with a mixed inventory snapshot. The API reported US crude oil stocks decreased by 11.2 million barrels on the week. Cushing crude oil stocks decreased by 2.5 million barrels. They also reported a 4.7 million bbl build in distillate fuel inventories and a 4.3 million bbl build in gasoline stocks. Total combined inventories of crude oil and refined products were modestly lower for the week and outside the range of market expectations also shown in the table above.