In the past one month, the price of crude oil has moved up by more than 10%. The upward movement was associated to the continued decline in Saudi Arabia crude and the anticipated impacts of Hurricane Florence. In the past three years, Saudi Arabia has been reducing its crude stocks. In July this year, it had the biggest drawdown to the stocks. In the month, it reduced them by 5.5 million barrels. Since May last year, the stocks have fallen by more than 11%. At the same time, the exports from Saudi Arabia declined by 126,000 barrels per day to 7.2 million barrels.
The current oil rally ignored the massive build up of crude oil in the United States. Data from the American Petroleum Institute (API) showed that a mammoth build of 1.25 million barrels of crude oil stocks in the week that ended on September 14. This was higher than the reduction of 2.47 million barrels expected by investors. Last week, the institute reported a hefty draw of 8.636 million barrels.
Yesterday, a Saudi Arabian official said that the country was comfortable with a $80 a barrel oil. The rally is also happening because of the US tariffs on Chinese goods. While traders were expecting tariffs of 25%, the Trump administration announced tariffs of 10% on Chinese goods. In addition, the recent hurricane did not have any major effects to the refinery of the crude oil.
Brent has reached $78. This price is at the middle band of the Bollinger Bands. Today, the pair will likely remain within this range as traders wait for the data from the Energy Information Administration (EIA). Traders expect a draw down of 2.75 million barrels against the 5.7 million barrels announced a week ago.