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Fundamentals Taking Over - Oil Market Daily

Summary

The EIA inventory report was bullish.

Libya is struggling.

Oil sands production will be back online in a week or so.

EIA Weekly Inventory Report

The EIA weekly oil inventory report was very bullish.

WTI (NYSEARCA:USO) and Brent opened lower, but moved considerably higher on the report. Is the market really that inefficient?

What's really intriguing to us is the craziness of the move: The report moved prices by almost $2 per bbl. Historically speaking, oil prices have never been this volatile. For historians of the oil markets, moves like these were nonexistent back before 1970s when the "Seven Sisters" used to fix prices at a predetermined price.

Since April, oil prices have largely stayed range bound between $40 and $46, and we expect the next leg up to $50 to be in the near future. As fundamentals continue to validate the move higher, we will need to see further deterioration in U.S. production to justify the $45-$50 range. Production outside of the U.S. also continues to drop due to geopolitical issues and low oil prices.

We think the move continues to be higher with WTI being above $60 by year-end. You can read our latest weekly...


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