Data from a private survey by the American Petroleum Institute (API) suggests that crude oil inventory will drop by 0.8 million barrels. In contrast, both distillates and gasoline are expected to rise by 0.4 million barrels each. This survey gathers insights from oil storage facilities and companies, offering a brief overview of stock levels and their changes. On Wednesday morning, the U.S. Energy Information Administration (EIA) will release its official report. Unlike the API survey, the EIA report is compiled from data provided by the Department of Energy and other government sources. The EIA report gives detailed statistics on refinery inputs and outputs and broader indicators of the oil market’s health. It also distinguishes between various crude oil grades, including light, medium, and heavy. This report is generally seen as a more accurate portrayal of the oil market compared to the API’s findings. This week’s private survey indicates a slight decrease in overall crude inventories, just below a million barrels. Meanwhile, gasoline and distillate stocks appear to have increased by about the same amount. While these changes might seem small on their own, they reflect specific trends that could influence short-term trading strategies. In particular, gasoline increases may attract more attention as they line up with the start of the U.S. summer driving season, a time when demand typically rises. The EIA report, scheduled for release on Wednesday morning, is highly anticipated. It uses federal data, which is often more trusted by commercial and institutional investors. This trust comes from the larger sample size and the data’s breakdown by crude density and refinery behavior, providing valuable insights for future predictions. When comparing the API expectations to what the EIA may confirm or challenge, it’s important to consider known variations between the two. Historically, the API has sometimes over- or underestimated stock changes. In the last two quarters, API forecasts for refined products like gasoline have been consistently lower than federal figures. This trend may help in understanding how long inventory levels may pressure refined margins. Recently, West Texas futures contracts have shown a downward trend after similar inventory draws, while crack spreads—especially RBOB gasoline versus crude—have widened. This indicates that the market is becoming more responsive to product storage data rather than just crude inventory. Small crude draws combined with rising gasoline supplies can pressure refinery utilization rates, which the EIA will detail. We expect operational rates to reflect decisions made in recent weeks during the spring maintenance period. From a trading perspective, it’s important to focus on refinery output and regional analysis. The Gulf Coast refinery utilization rate influences resupply patterns not only in the U.S. but also for exports, particularly for medium sour blends. While the DOE’s data may not directly impact prices on the first day of release, it often shifts forward curves in the hours following the release if unexpected changes are noted at Cushing or PADD 3. There’s also a connection between rising distillate stock levels and overall industrial activity, a slight trend supported by this week’s data. However, given recent unemployment figures and lower trucking mileage, diesel demand may falter as we move into late June. If consumption does not pick up, stock levels may continue to rise. One point the survey didn’t directly address—and which the government report may clarify—is the rate of product exports, particularly amidst uncertainty regarding Asian demand. We know that refiners have been relying more on international buyers recently, but official port clearance data provides a clearer picture of these export volumes. Markets have factored in a relatively stable inventory trend. If the final numbers exceed the API estimates—a situation that has occurred three times in the last six reports—traders may need to adjust mid-curve options. We can expect fluctuations in distillate contracts and shifts in gasoline pricing to be key areas of potential volatility. Refined product differentials in PADD 1 are crucial for wholesale distribution, particularly during summer formula-switch periods. Any surplus in these areas could tighten margins for refiners, which may be reflected in next month’s earnings reports. In summary, while the expected drop in crude oil inventory is modest, the real decision points for trading strategies this week will center around product movements, specifically in distillates and gasoline, rather than crude prices alone.

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