A recent private survey by the American Petroleum Institute (API) showed a smaller decline in headline crude oil than expected. Analysts thought there would be a drop of 1.9 million barrels. Instead, the decrease was not as significant as anticipated. Distillate inventories were expected to increase by 0.9 million barrels, while gasoline was predicted to drop by 2.2 million barrels. This information is important because it comes just before the official report from the US Energy Information Administration (EIA), which is set to be released on Wednesday morning. The API survey collects information from oil storage facilities and companies, while the EIA’s report uses data from the Department of Energy and other government sources.

EIA And API Report Dynamics

The API report provides insights into changes in total crude oil storage compared to the previous week. However, the EIA report is viewed as more comprehensive and accurate. It includes data on refinery inputs and outputs, as well as storage levels for different grades of crude oil, such as light, medium, and heavy. The upcoming EIA data will likely give a clearer picture of the current oil market situation. The smaller-than-expected decline in crude oil inventories is a bearish signal for the market. This indicates that demand is weaker than predicted, putting downward pressure on WTI crude futures, which are around $82 per barrel. Traders should prepare for volatility, as this finding creates a cautious mood before the important official data release. It’s important to note that the initial API report often serves as a lead-in, and the market’s larger reactions will follow the official EIA data tomorrow. The differences between the API and EIA reports have been significant recently, leading to sharp price swings. For example, in May 2025, a bearish API report was succeeded by a bullish EIA number, resulting in a 2% price spike that surprised many traders. Given this uncertainty, one effective strategy is to buy options that benefit from significant price movements in either direction. The high implied volatility suggests the market is prepared for a big shift, so straddles or strangles on near-term crude oil options could be smart moves. This approach allows traders to take advantage of the EIA data reaction without guessing the direction ahead of time.

Market Seasonality and Global Factors

This inventory update comes as we approach the end of the peak US summer driving season. Last week’s EIA report confirmed that gasoline demand has dipped below 9.2 million barrels per day for the first time since June, indicating a seasonal slowdown. A smaller crude oil draw corresponds with this trend of decreasing consumer demand. On a global level, disappointing manufacturing PMI data from China raises concerns about demand from the world’s largest oil importer. This challenge, combined with a potentially oversupplied domestic market in the US, supports the idea of a near-term price correction. This situation might limit any significant price increases in the upcoming weeks. We should also keep an eye on the active hurricane season in the Gulf of Mexico. A major storm could quickly disrupt production, pushing prices up despite bearish inventory data. This remains the most crucial risk for potential price increases in the near future. Create your live VT Markets account and start trading now.

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