A significantly appreciating US dollar put pressure on commodity prices across the board yesterday. Brent shed just shy of 3% and closed trading at $63.7 per barrel, its lowest level in at least a month. WTI fell to a weekly low of $57.7 per barrel. Prices this morning are recovering slightly to $64 and $58.5 per barrel respectively because US stocks are expected to have decreased for the fourth consecutive week. The API will be publishing its inventory data after close of trading this evening, while the US Department of Energy will release official inventory data tomorrow afternoon. The anticipated inventory reduction is due first and foremost to a high rate of crude oil processing. The summer driving season – considered to be the period of highest demand – has been underway since last weekend in the US. Refineries require additional crude oil to meet the increased demand for gasoline during the summer months, which causes crude oil stocks to decline. On the supply side, there is still no sign of any relief for inventory levels. The higher oil prices mean that it is once again lucrative for many US oil producers to drill for oil. The decrease in US crude oil production could thus turn out to be less pronounced than anticipated, with the result that stocks could rise again once crude oil processing normalizes. Iraq may flood the oil market with additional oil next month: according to shipping programs, Iraqi oil exports are set to soar by 800,000 barrels per day month-on-month and achieve a new record level of 3.75 million barrels per day, notes Commerzbank. If this actually comes to pass, the oversupply risks becoming even bigger. Against this backdrop there is still correction potential for oil prices.
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