A private survey from the American Petroleum Institute (API) revealed a bigger drop in crude oil reserves than expected. The predicted decline was -0.9 million barrels. For distillates and gasoline, the anticipated changes were +1.0 million barrels and +0.1 million barrels, respectively. The API survey gathers data from oil storage facilities and companies. This report comes out before the official data from the U.S. Energy Information Administration (EIA), which is due on Wednesday morning U.S. time.

EIA Comprehensive Data

The EIA report is more detailed, using information from the Department of Energy and other government agencies. While the API provides general crude storage levels and weekly changes, the EIA report gives specifics, including refinery inputs and outputs, plus storage levels for different types of crude oil. Analysts view the EIA report as more reliable for understanding the oil market, offering insights into light, medium, and heavy crude oil storage levels. The large crude oil draw in the private survey is a positive sign for the market. It indicates that demand is outpacing supply, which could lead to higher oil prices soon. Traders should be on the lookout for a possible price spike in WTI and Brent futures leading up to the official report. A key event this week is the government’s release of the EIA data. If the EIA confirms a significant drop in reserves, it would support the case for a continual price rally, especially as we near the end of the summer driving season. A similar trend occurred in late 2023 when decreasing inventories and OPEC+ cuts led to a strong price increase.

Market Implications and Strategic Options

With WTI crude prices already close to $92 a barrel—its highest in over a year—this inventory update is particularly significant. Recent satellite data indicates a slowdown in exports from major Middle Eastern ports, raising global supply concerns. U.S. commercial crude inventories have dropped by more than 15 million barrels in the last month, so another large decline would confirm a tight market. For derivative traders, this scenario suggests considering short-term call options to benefit from a potential price rise while managing downside risk if the EIA data falls short. A move above the recent high of $93.74, a level last seen in August 2024, is the next technical target. This strategy allows for participation in upward trends while keeping risk manageable. We can also monitor spreads, like the WTI-Brent spread, to assess international market tightness. A widening spread might suggest that U.S. supply issues are becoming clearer compared to the global benchmark. Additionally, with the distillate season approaching, bullish positions on heating oil futures could be appealing if crude inventories keep decreasing. Create your live VT Markets account and start trading now.

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