WTI Extends Losses After API Reports Smaller Than Expected Crude Draw

Oil prices dipped today, with WTI unable to hold above $80 as concerns continue over China's economic growth (demand) and Iran exports jumping again (supply)

“Call it recession fears, economic headwinds or demand worries - they have been successfully countered by the OPEC+ group supply-management strategy,” said Tamas Varga, an analyst at brokerage PVM.

“Whilst the oil balance could obviously deteriorate, currently there is no reason to believe that global oil consumption would approach, let alone fall below supply.”

The 'higher for longer' Fed is another anchor around oil's neck as market expectations for Fed rates have shifted hawkishly in recent weeks.

API

• Crude-2.4mm  (-2.9mm exp)

• Cushing -2.21mm

• Gasoline +1.9mm (-500k exp)

• Distillates -150k (+200k exp)

Crude stocks fell for the second week in a row, drawing 2.4mm barrels (slightly less than the expected 2.9mm draw). Most problematic is the unexpected build in gasoline stocks...

Source: Bloomberg

WTI was hovering around $79.80 ahead of the API data and slipped lower after the print...

"At a minimum, there could be a contagion risk in China," but there are also concerns over whether it will spread globally, Stephen Innes, managing partner at SPI Asset Management, told MarketWatch.

"Continuously poor macroeconomic data from China is becoming a bearish headwind for the oil market, which has been focused on supply-side constraints from the OPEC+ coalition to continue supporting the market," he said.

Still, "despite doubts and wariness on the demand side of the market, OPEC still holds pricing power, and oil prices continue to be supported on dips."

Additionally, the sharp drop in the Russian ruble, meanwhile, could impinge Russia's ability to continue scaling back crude exports.