WTI Holds Gains After API Reports Unexpected Crude Inventory Draw

Oil priced ended notably higher today after recovering strongly from overnight weakness (driven by a Bloomberg report that said fresh U.S. sanctions targeting vessels and refineries handling Iranian oil shipments were having a muted impact on crude supply).

If implemented and enforced, the new sanctions could add as much as $8.40 to global prices, according to ClearView Energy Partners, a Washington-based consulting firm.

But…

“Oil traders are nonchalant because they know Biden will certainly sign whatever waivers are necessary to keep Iranian oil flowing into the market just as he is keeping Russian barrels flowing into the market,” said Jim Lucier, managing director at Capital Alpha Partners, a Washington-based research group.

And here’s why!

Source: Bloomberg

The rebound in prices came as WTI tested to a $80 handle, finding support at its 50DMA ($81.25), and after dismal PMI data prompted a ‘bad news is good news’ bid in stocks and bonds as rate-cut hopes were revived (modestly).

Analysts expect a fifth straight week of crude inventory builds and another drawdown in product stocks at tomorrow’s DOE data dump. Tonight’s API preview will confirm or deny hopes…

API

Crude -3.23mm (+500k exp)

Cushing -898k

Gasoline -595k (-1.5mm exp)

Distillates +724k (-1.0mm exp)

Crude stockpiles unexpectedly drew down last week (after four straight weekly builds), but distillates stocks unexpectedly built…

Source: Bloomberg

WTI was trading around $83.30 ahead of the API data (after a roller-coaster day)…

The conflict in the Middle East has “undoubtedly exacerbated tensions in an already volatile region,” Stephen Innes, managing partner at SPI Asset Management, told MarketWatch.

“While the recent attacks have been downplayed, the potential for further escalation cannot be entirely dismissed.”

However, “there’s a lesson to be gleaned from this situation, particularly in how swiftly demand responded to higher oil and gasoline prices, as evidenced by the increase in U.S. oil stockpiles,” he said.