EIA's oil data today was mixed. Despite the large crude draw, implied oil demand for gasoline, distillate, and jet fuel trended lower.
While some would argue that this is not a sign of strength, we would urge readers to focus on refining margins instead. With refining margins inching higher today in spite of the crude sell-off, we think end-user demand remains fine and is not being captured in the data accurately. While EIA has had a good history of showing a directional correlation between the weekly and monthly data, the absolute figures are suspect.
In addition, we think the latest correction in oil prices is more of a technical move than something fundamental. Following the price rejection at $84.8, crude is going to retest support levels around $78 before another attempt at this crucial resistance level.
Over the coming weeks, we should continue to see US crude storage move lower, which should give a further tailwind to prices.