Gold longs have thrown in the towel for now in their pursuit of $1,900 an ounce and even U.S. equity markets pulled back sharply Wednesday. Oil bulls remain steadfast, however, in the belief that crude prices can only go higher despite a monstrous weekly build in stockpiles.
Crude inventories rose by 15.2 million barrels last week compared with analysts’ expectations for a 1.42 million-barrel drawdown, the Energy Information Administration said on Wednesday.
That was not the only build announced by the EIA.
Distillate stockpiles, which include diesel and heating oil, rose by 5.2 million barrels during the week ended Dec. 4, against expectations for a 1.41 million barrel increase, the agency’s data showed.
U.S. gasoline inventories rose by 4.22 million barrels last week the EIA said, compared with expectations for a 2.27 million-barrel build.
Despite the staggering inventory jumps, oil prices barely fell.
New York-traded West Texas Intermediate, the leading indicator for U.S. crude, settled Friday’s trade down 8 cents, or 0.2%, at $45.52 per barrel. On Tuesday, WTI hit $46.68, its highest level since March.
London’s Brent, the global benchmark for crude, actually finished the day higher, rising a mere 2 cents to settle at $48.86. Brent hit a March high of $49.86 in the previous session.
Oil prices have been on a tear over the past month on bets that people across the world might soon be able to travel freely as millions of doses of coronavirus vaccines were being prepared for delivery over the course of the next few weeks, after their approval by U.S. and U.K. health authorities.
Also helping market sentiment was the apparent discipline by oil producer group OPEC+ in allowing a hike of just 500,000 barrels per day in total by its 13 members and 10 allies — versus initial talk of a 2 million bpd hike.
Even so, the market’s refusal to buckle in the face of the inventory builds announced by the EIA on Wednesday was surprising. Earlier in the day, gold prices fell as much as $40 per ounce from session highs while Wall Street’s Dow and Nasdaq both fell sharply as Covid-19 stimulus talks in the U.S. Congress appeared to break down again.
“I just think the oil market continues to be as hopeful about the future oil demand promised by the vaccine,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. “When the crash comes, it will probably be as horrific as it can be.”
The EIA data showed a 1.1-million barrels per day rise in imports from the previous week as one of the catalysts for the crude build.
A drill down of the agency’s numbers showed a 12 million barrel build in the Gulf Coast of Mexico, and 3.2 million barrel gain in the West Coast.
The builds suggested that Saudi Arabia, which had led export cuts to the U.S. market for months, leading the OPEC output curtailment, has started ramping up crude cargoes to America again.