• After four straight weeks of drawdowns, U.S. crude oil inventories unexpectedly rose this week.21 Investors largely looked past the increase as other news from the U.S. Energy Information Administration’s Weekly Petroleum Status Report generally remained supportive of oil prices. Supplies of gasoline and distillates, for example, declined from a week earlier and both came in below their 2016 levels.21
  • Taking a step back from the fluctuations of weekly data, a bigger picture is emerging of the positive fundamental backdrop supporting oil prices. OPEC member and oil-producing non-OPEC nations, for example, remain largely compliant with their agreement, initiated in November 2016, to cut supply. For each of the past two months, non-OPEC nations have exceeded their cutback targets while OPEC member nations have generally been on pace with theirs.22 This week, Saudi Arabia’s energy minister asserted that the country remains willing to do “whatever it takes” to bring global oil inventories down to their 5-year average.23
  • Meanwhile, the U.S. is in the midst of its largest drawdown of crude oil supplies in more than 10 years.21 While U.S. stockpiles of crude oil have increased an average of approximately 22 million barrels each year since 2007, stockpiles this year have drawn down more than 21 million barrels.24
  • We believe oil prices will likely continue to experience significant fluctuations through the coming months and years, yet one could see this year’s drawdown as laying the foundation for a more balanced supply/demand outlook.


1 The Wall Street Journal, http://on.wsj.com/2xs6q0k.
2 U.S. Census Bureau, http://bit.ly/1fKNCzo.
3 Federal Reserve Bank of St. Louis, http://bit.ly/29ecBfp.
4 Bank of America Merrill Lynch U.S. High Yield Master II Index.
5 Federal Reserve Bank of St. Louis, http://bit.ly/2d3pN5b.
6 Federal Reserve Bank of St. Louis, http://bit.ly/292Tgue.
7 The Wall Street Journal, http://on.wsj.com/2gKYkwR.
8 Bank of America Merrill Lynch U.S. High Yield Master II Index (yield-to-worst).
9 Credit Suisse Leveraged Loan Index.
10 Bank of America Merrill Lynch U.S. Corporate Master Index.
11 Bank of America Merrill Lynch U.S. 2-year Treasury Note Index.
12 Bank of America Merrill Lynch U.S. 10-year Treasury Note Index.
13 The Wall Street Journal, http://on.wsj.com/2zBfqRs.
14 CNN, http://cnn.it/2zG88fl.
15 Federal Reserve Bank of St. Louis, http://bit.ly/2anGvQ0.
16 Bloomberg, https://bloom.bg/2yROVbq.
17 U.S. Commerce Department, http://bit.ly/1DqcVBJ.
18 The Wall Street Journal, http://on.wsj.com/2iFgVLa.
19 U.S. Federal Reserve, http://bit.ly/29y0IjN.
20 Bloomberg, based on CME data.
21 U.S. Energy Information Administration, as of October 26, 2017, http://bit.ly/2ySPILf.
22 Bloomberg, https://bloom.bg/2l3XhFN.
23 DailyMail, http://dailym.ai/2zGImra.
24 Based on the time periods from approximately January 1–October 20, from 2007 through 2017.


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