Oil prices extended gains overnight with Brent at its highest since April and WTI testing $76, breaking out of its two month range.
Prices have climbed since OPEC+ heavyweights Saudi Arabia and Russia pledged even more output reductions in an effort to rebalance the market. Strong Russian supply - despite sanctions due to the war in Ukraine - has been a headwind for the market.
Those flows are now showing signs of dropping, with average shipments falling below February averages.
Additionally, the global market is expected to tighten in the second half and stockpiles are forecast to draw through 2024, according to a report by the Energy Information Administration, which is due to release its weekly inventory figures later Wednesday.
Finally, this morning's cooler-than-expected CPI offers hope for a less tight Fed and less drag on demand for the energy complex.
All that being said, last night's unexpected crude (and product) build, reported by API, is not what the bulls want to see continuing.
API
Crude +3.026mm (-1.00mm exp)
Cushing -2.15mm - biggest draw since May 2022
Gasoline +1.00mm (-1.1mm exp)
Distillates +2.908mm (+150k exp)
DOE
Crude +5.946mm (-1.00mm exp)
Cushing -1.605mm
Gasoline -4k (-1.1mm exp)
Distillates +4.815mm (+150k exp)
The official data confirmed API's with large crude and Distillates builds and a significant draw at the Cushing Hub...
Source: Bloomberg
For the 15th week in a row, the Biden admin drained the SPR (401k barrels)...
Source: Bloomberg
Bear in mind, the magic that is the 'adjustment factor; suddenly re-emerged (as prices ready to break out?)...
US Crude production slipped marginally off cycle highs as the rig count plunges...
Source: Bloomberg
Gasoline demand pulled back hard from the previous week’s 19-month high -- retailers are likely still working down the gallons they bought ahead of the July 4th travel weekend. The four-week average slipped, but remains 6% above the same time last year, which was when consumers began to hold back at the pump after retail prices hit record highs.
WTI was hovering around $76 ahead of the official print, having broken above the Saudi-cut highs...
And held the gains after the print...
Here’s the latest on current market conditions from Bloomberg Intelligence Senior Oil & Gas Analyst Fernando Valle: Easing recession fears have lifted Brent and WTI prices, but that may be premature given the Federal Reserve’s signaling of a return to interest-rate hikes at its July meeting after skipping a hike in June. US spending data still suggest muted economic activity, while oil-price support amid expectations of a soft landing may spur renewed concerns about inflation, and consequently, interest rates. A recovery in US refineries’ crude throughput could help drain inventories and support the rally in oil prices.
