A recent private survey by the American Petroleum Institute (API) has shown a significant increase in crude oil stock levels, which is unexpected. Analysts had predicted a decrease of 2.1 million barrels for crude oil, a drop of 0.3 million barrels for distillates, and a decline of 1.5 million barrels for gasoline. This survey gathers information from oil storage facilities and companies. The official government report, expected Wednesday morning, will come from the U.S. Energy Information Administration (EIA). Unlike the API report, the EIA provides detailed statistics on refinery inputs and outputs as well as storage levels for various crude oil grades.

EIA Report vs. API Survey

The EIA report uses data from the Department of Energy and other government organizations. It is typically seen as more reliable and thorough than the API survey. While the API gives a quick look at total crude storage and changes from the previous week, the EIA offers a broader view of the oil market’s condition. For derivative traders, the difference between the API data and the upcoming EIA report creates a notable source of volatility. The API reported an increase of 3.03 million barrels last week, defying common market expectations, which anticipated a decrease. Such a large difference, especially concerning crude oil balances, can lead to short-term price changes, affecting futures spreads and calendar structures. Wall Street had factored in tighter supply assumptions. Normally, smaller inventories lead to higher prices, suggesting strong demand or limited supply. However, when there is a build-up instead, this logic reverses. Prices usually drop, as larger stockpiles indicate lower consumption or higher production, both of which weaken the bullish stance.

Impact on Derivative Traders and Market Dynamics

Large inventory builds are especially important during contract rollover periods. A wider contango—which means a bigger difference between short-term and long-term futures—can put pressure on those holding long positions. This is especially true if they based their entries on backwardation expectations. Depending on what the EIA confirms or disputes tomorrow, we anticipate a significant shift in open interest across expiry curves. For traders dealing in product-related derivatives, the figures for gasoline and distillate movement also have important implications. Inventories for these components exceeded expectations, with gasoline showing an unexpected increase instead of the predicted drop of 1.5 million barrels. This is crucial because it often represents seasonal demand—like summer driving or winter heating. Higher stocks at the start of peak consumption months increase downside risks for crack spreads. Positions linked to refinery margins may need adjustment if the EIA data aligns with early indications. The API report process, while helpful, doesn’t have the detail found in the EIA’s data. This difference often causes spot and futures prices to react more strongly once the EIA numbers are released, particularly if there’s another discrepancy. The difference in methodology is significant—the API collects voluntary data from private firms, while the EIA uses systematic collection methods. We will be watching for changes in refinery utilization rates, export flows, and shifts in regional stocks. These areas provide more insights into supply conditions that directly affect derivatives pricing. As a result, we are adjusting our expectations for implied volatility, especially in the 48 hours before the EIA’s release. Traders sitting on short-dated options and straddles may want to add hedges or adjust their positions, as the market often recalibrates sharply once more accurate data is available. We’re also observing whether any Gulf Coast or Cushing-specific metrics indicate logistical changes, as either outcome could affect basis trade decisions. If the EIA report contradicts the API report again, whether in magnitude or direction, it could lead to rapid countertrend movements. The focus is not on whether the market was correct earlier, but on how quickly it adjusts when the facts change. Create your live VT Markets account and start trading now.

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