Oil prices rebounded from weakness yesterday afternoon with WTI testing back above $84.50 ahead of tonight's API inventory data to seven year highs.
"There is little that can tilt oil prices away from their upwards momentum on the short term, as the only real supply source of significance is OPEC+, and there doesn't seem to be much mood for policy change on that front for the moment," said Louise Dickson, senior oil markets analyst at Rystad Energy, in daily market commentary.
"There are only two offramps to the current bout of oil price volatility and one is OPEC+ taking supply action, but the group has repeatedly said it does not plan on altering its strategy," said Dickson. There's also the chance that "another round of COVID-19 breakouts and lockdowns could again dim the demand outlook," she said. "But it seems to be a last resort strategy for many economies that are tired of repeating the unpopular economy-damaging process."
So all eyes on stocks and supplies...
Crude +2.318mm (-100k exp)
Cushing -3.734mm - biggest draw since January 2021
Gasoline +530k (-2.7mm exp)
Distillates +986k (-2mm exp)
Last week saw a surprise crude inventory build (and product builds) but offset by a huge draw at Cushing...
Refiners “are drawing down on Cushing at a pretty incredible pace right now,” said Flynn. “We’re getting close to empty.”
WTI hovered around $84.50 ahead of the print and dipped on the unexpected build...
The crude market’s pricing structure remains deeply backwardated, a bullish pattern in which near-term prices are more costly than those further out.
Meanwhile, some traders are "wondering if the oil prices have come up too far, too fast," so they were reluctant to drive prices higher "until we get a better handle on [crude] inventories this week," said Phil Flynn, senior market analyst at The Price Futures Group..