Ahead of the official US government data release, a survey from the American Petroleum Institute (API) offers insights into weekly oil inventories. Analysts expect a decrease in crude oil by 1 million barrels, an increase in distillates by 40,000 barrels, and a decline in gasoline by 200,000 barrels. The API collects data from oil storage facilities and companies, while the government report is prepared by the US Energy Information Administration (EIA). The EIA gathers information from the Department of Energy and other agencies. The API mainly focuses on total crude oil storage levels and changes each week, whereas the EIA also includes statistics like refinery inputs, outputs, and storage for different types of crude oil.

EIA Report’s Significance

The EIA report is typically seen as more detailed and accurate than the API survey. The official data is expected on Wednesday morning (US time), offering a broader market overview. Today’s private survey revealed an unexpected increase in crude oil inventory of 2.5 million barrels, which contrasts sharply with the anticipated draw of 1 million barrels. This difference between the API data and market expectations creates uncertainty. Tomorrow’s official EIA report will be crucial, as it is regarded as more thorough and precise. Currently, traders are using short-dated options in anticipation of the EIA release, leading to increased volatility in October contracts. A bearish EIA number confirming the inventory increase could push WTI crude prices below the important $85 per barrel support level seen over the past month. On the other hand, if the EIA reports a draw as expected, it could result in a short squeeze. The inventory situation is further complicated by the active hurricane season. Hurricane Leo, now a Category 3 storm, is heading toward the Gulf of Mexico, endangering production facilities that contribute to about 17% of U.S. crude oil output. Past hurricanes, like Ida in 2021, disrupted production by more than 2 million barrels per day, raising concerns of a similar event.

Demand Side Dynamics

On the demand side, signals remain strong, preventing significant price drops despite the bearish inventory news. The jobs report from last Friday indicated that the US economy added a surprising 210,000 jobs in August, suggesting robust consumer spending and fuel consumption. This strong demand serves as a price floor, even with temporary increases in inventory. It’s important to remember the significant divergence between API and EIA reports in spring 2024, which caused a sharp price reversal after the official data was released. While the API survey is useful, the EIA report provides a clearer market picture by including data on refinery inputs and other key indicators. Therefore, holding high-conviction positions before tomorrow’s official numbers carries considerable risk. Create your live VT Markets account and start trading now.

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