Oil prices managed to briefly rally back above $40 (WTI) overnight as Trump backtracked a little on standalone stimulus deals, but that did not last long and API's surprise report of a crude build was back top of mind for traders.
Trump’s intention “to postpone talks about economic aid until after the elections is weighing on prices today,” said Carsten Fritsch, analyst at Commerzbank AG.
Crude +951k (-2mm exp)
Gasoline -867k (-800k exp)
Distillates -1.033mm (-2.9mm exp)
Crude +501k (-2mm exp)
Gasoline -1.435mm (-800k exp)
Distillates -962k (-2.9mm exp)
Confirming last night's API-reported build, official data showed a rise in US Crude stocks (+501k vs a 2mm barrel draw expectation)...
Amid storms and shut-ins, production continues to be 'noisy' at best, but shows no signs of accelerating...
WTI traded around $39.50 ahead of the official inventory data and rose modestly after the print (presumably a slightly smaller build than API)...
...but quickly reversed lower...
As Bloomberg notes, oil has whipsawed the past few days, driven by the prospects of financial stimulus and President Trump’s Covid-19 diagnosis. While rising OPEC+ supply and a resurgence in virus infections around the world are bearish, a workers’ strike that’s shutting down fields in Norway and a hurricane approaching the Gulf of Mexico are likely to provide some support.
Finally, in a bullish sign for the oil market, Bloomberg's Tai Liu notes that the global floating crude storage glut is easing. Floating crude storage soared to a record 215 million barrels in mid-June amidst the pandemic-led global oil demand destruction, according to Vortexa. It now stands at 146 million barrels, a drop of 32% from the peak.
Floating crude storage is usually a storage of last resort owing to higher costs, but traders took advantage of a steep contango and hoarded millions of barrels of oil on tankers during the depth of the pandemic. This process also works in reverse -- traders are more likely to draw floating crude inventory out of storage to avoid paying the high carrying costs.