Oil prices sold off almost 5% on what many people attributed to a story that some unnamed Russian oil company source said that Russia was against a production cut. Today those sources are still unknown, but really the sell-off in oil probably had more to do with the fact that Saudi Arabia cut prices to Asia as the kingdom was losing market share to Iraq and Iran that has been raising output and taking away business from the Saudis. Reuters News reported that OPEC exports increased last month. OPEC exported 25.92 million barrels per day in June, up 450,000 bpd from May and 1.9 million bpd more than a year earlier and reports of rising production from Nigeria and Libya is giving the perception that the OPEC/non-OPEC accord is becoming strained and that might cause the whole production cut deal to fall apart. 

Yet while the market speculates on reports from unnamed Russian sources and conflicting data on OPEC exports, an earlier report showed that OPEC exports fell and it seems that many are looking at data with bearish blinders on. The reality is that we are seeing US oil supply still decline at record pace. The American Petroleum Institute (API) reported that US crude oil supply plunged by 5.8 million barrels last week. That drop comes as the rise in US rig counts paused and we saw a drop in US oil production. Where the trend of falling US oil supply is most evident is in the NYMEX delivery point of Cushing, Oklahoma where supplies fell again by a hefty 1.4 million barrels.

The API also reported a large 5.7 million barrel drop in gasoline supply as gas went up on the rack ahead of what may have been a record breaking demand weekend for gasoline as prices hung around a 12 year low for the holiday. While the market did see a 400,000 barrel build in distillates, the overall bullish nature of the data does not fit the bearish oil narrative.  That makes today’s Energy Information Administration (EIA) report very big to see if oil can regain the nearly 5% loss it suffered yesterday.