Oil Holds Two-Day Drop as US Oil Inventories Expand

Natalia, of course, it really doesn't help also that the dollar was stronger today. But how are investors really reacting to this report? Right. So inventory is jumped by 16.3 million barrels. And it is a big increase. But I have to mention that this is largely because the IEA used so-called adjustment factor. It is really confusing.

No one really understands how it works. But basically, there's a difference between how much crude enters the market supply and then how much crude leaves the market, what they call disposition. So it is negative for crude prices, as we can see today. But traders I spoke with are saying that they are focused on a macro picture. We know that, for example, trajectory, as they say, for demand is much better. But for supply, it is not improving. Also, Brent has recently flipped to backwardation, which is also a good signal for the market.

We also had another big release today from the IEA. So what was the biggest takeaway there? Right. So the IEA improved forecast for global demand. Now they expect that demand will increase by 500,000 barrels a day in the first quarter. Overall, during this year, demand will be higher by 2 million barrels a day. And of course, they mentioned that China is playing a huge role as the economy reopens. It will bring more demand for crude.

And they said that oil market can stay, remain in surplus during the first half of 2023. But then it can actually flip to deficit during the second half of this year. So and since they mentioned China, many traders are really keeping an eye on China's purchases of crude. China has been buying more crude during the past two weeks or so. So for example, quite recently they bought 10 million barrels from the UAE. And also China's refineries are now processing much more crude.

Haidi Stroud-Watts, Natalia Kniazhevich, Oil, Shery Ahn, U.S., U.S. Government, oil markets, oil prices, oil supply