Hawkish Fed Comments and Inventory Decline: Impact on the Commodities Market
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The Commodities Feed: Hawkish Fed comments weigh on the complex
Hawkish comments from the US Federal Reserve – that it could potentially raise interest rates in July and September – have weighed on the commodity complex this morning. Meanwhile, the weekly crude oil report from the Energy Information Administration (EIA) yesterday was constructive for the oil market, with inventory falling at a rapid pace.
Energy – EIA reports sharp decline in crude oil inventory
ICE Brent and NYMEX WTI jumped higher yesterday after the EIA reported a largely constructive crude oil market report with a sharp inventory decline. However, the market has been trading softer this morning on account of hawkish comments from the US Fed as inflationary concerns continue.
The weekly report from the EIA shows that commercial crude oil inventories in the US fell by 9.6MMbbls (the largest weekly decline since 19 May) over the week to 453.7MMbbls (the lowest since 27 January). The decline was higher when compared to the market expectation of a drawdown of 1.3MMbbls and the decline of 2.4MMbbls reported by API for the week. When factoring in the Strategic Petroleum Reserve (SPR) releases, the decline was even sharper, with total US crude oil inventories falling by around 11MMbbls, as SPR stocks fell by 1.4MMbbls for the week. US crude oil exports increased to 5.3MMbbls/d for the week which has weighed on the inventory.
Meanwhile, crude oil inventories at Cushing, Oklahoma, rose by 1.2MMbbls to 43.2MMbbls, the highest level since June 2021. The EIA reported that US crude oil production was unchanged at 12.2MMbbls/d last week.
As for refined products, gasoline inventories rose by 0.6MMbbls, against a forecast for a marginal build of 0.1MMbbls. Meanwhile, distillate stockpiles rose by 0.1MMbbls last week, slightly lower than expectations for a build of 0.2MMbbls. Refinery utilisation rates dropped from 93.1% to 92.2% for the week.
