Oil Market Stuck in a Rut

The oil price rally stalled at the beginning of July in the low US$70s. Oil has since retreated down in the high $50s and low $60s, where it is regrouping in anticipation of an increased pace of global inventory destocking later in the summer. My models (I use floating storage as a leading indicator) are not showing the inventory situation tightening yet....but if its any consolation to oil bulls, global inventories appear to have stopped increasing.

The weekly US oil inventory numbers which come out each Tuesday evening and Wednesday morning were not really a surprise. Oil ticked higher today more due to an improved economic (and equity market) outlook rather than any singular oil data point. The Wall Street Journal quoted my scepticism that today's price rally of around $2 up to $61.54 was due to the weekly US inventory numbers:

"There's no demand number that you can point to ... it's just that (distillate) inventories didn't build as much as expected."

Note that in the quote I was referring to today's (Wednesday's) price action and not anything more long term. To put the long term in perspective, here is a chart of oil prices (NYMEX WTI crude) since 2001:

(click chart to enlarge)