Oil prices are rebounding off overnight lows - once again testing the technical support of the 100-day moving average - after sliding following API's report of across the board inventory builds last night.
Oil has been on a downtrend since early April, posting losses in three of the past four weeks, with weakness not just in timespreads but in processing margins too.
That decline has come as much of the geopolitical premium from tensions in the Middle East has unwound, bringing traders’ focus back to a cooling market.
OPEC is due to meet next month to assess supply policy after implementing production cuts over the first half of the year to support prices. Most traders expect that the curbs will be extended, possibly to the year-end
For now, the next leg will be decided by the official supply/demand data...
API
Crude +509k (-1.40mm exp)
Cushing +1.339mm
Gasoline +1.46mm
Distillates +1.713mm
DOE
Crude -1.36mm (-1.40mm exp)
Cushing +1.88mm
Gasoline +915k
Distillates +560k
After last week's large crude build (and the API report overnight), expectations remained for a small draw... and the official data confirmed exactly that (opposing what API reported). Stocks at the Cushing Hub rose considerably and products also saw builds...
Source: Bloomberg
The Biden admin added 947k barrels to the SPR - the most since Dec 2023
Source: Bloomberg
US Crude production was flat near record highs at 13.1mm b/d...
Source: Bloomberg
WTI was trading around $78 ahead of the official data, just below its 100DMA...
...and WTI extended gains after the 'surprise' draw...
Overall, "oil is lower because a renewed battle between Israel and Hamas, in isolation, does not really affect oil-producing nations," Stewart Glickman, energy equity analyst at CFRA Research, told MarketWatch.
If Iran is "subsequently encouraged to do more direct attacks on Israel, it may be different," he said, but the market is "discounting this possibility."
Finally, President Biden will use crude oil from the strategic petroleum reserve should the need arise, energy adviser Amos Hochstein has said, noting there was enough oil in the reserve.
"We have been replenishing into the SPR for the last several months. I think we have sufficient supply in the SPR to address any kind of concern in the economy if we need it," Hochstein said, speaking at the Milken Institute Global Conference, as quoted by Reuters.
