The US Energy Information Administration is set to release its weekly Crude Oil Inventories status report at 18:00 GMT+3, telling markets about changes to the number of barrels held by US firms.
This weekly update on US oil stock change is important because it is a stand-in indicator of oil demand. A forecast-defying change in oil stock levels can result in a significant impact on markets. If today's report defies predictions, it may be a catalyst for further market turmoil, further boosting inflation.
How the report may affect markets?
Under normal market conditions, an increase in crude inventories that exceed forecasts implies weakening demand, exerting downward pressure on oil prices. The same is true if a decline predicted by analysts turns out to be underwhelming.
Conversely, changes that indicate growing demand - such as an anticipated increase in inventories not materializing or a decline in stocks proving greater than expected - result in upward price pressure.
Higher than expected change → lower demand for oil
Lower than expected change → higher demand for oil
How did markets react previously?
The figures released on 22nd September 2021 were more or less in line with market expectations. The market reacted by trading sideways in a tight range for a few hours before resuming with the larger uptrend that began in early 2020.
The figures released on 29th September 2021 were more than expected by the market. The market expected a reduction in inventory of 2.5 million barrels, but instead, there was an increase in inventory by 4.6 million barrels. This signalled to the market that there was more supply available than expected. The result was a drop in oil prices that continued into most of the next day.
The latest figures released on 6th October 2021 were also more than expected. The market expected an increase in inventories of just 0.8 million barrels but instead got an increase of 2.3 million barrels. Oil prices again tumbled for hours into the next trading day.
What are analysts forecasting for today?
According to Forex Factory, the markets forecast an increase in inventories by 1.1 million barrels. If the figures released are significantly above 1.1 million, then oil prices may likely decline for several hours, and vice versa.
Investors should note all this is happening in the backdrop of OPEC+ refusing on 4th October 2021 to increase oil production above 400,000 barrels at a time when there is a 1.5 million barrels a day deficit, according to Citigroup. Hence, the market may be particularly reactive when the figures are released later today.