US weekly crude oil inventories fell by 9.119 million barrels in the week to 5 June, based on API data. The draw was deeper than market expectations of a 3.4 million-barrel decline, pointing to a faster-than-anticipated reduction in stockpiles over the period.
The result leaves the weekly change at -9.119 million versus a -3.4 million consensus forecast. API’s report focuses on crude oil inventories and is often monitored as an early indicator ahead of subsequent official updates.
Inventory Draw as a Bullish Signal Amid Surging Demand
We are viewing the unexpectedly large crude oil inventory draw as a significant bullish signal for the market. A drop of over 9 million barrels far exceeds forecasts and points to much stronger demand than was being priced in. The official EIA report today confirmed a similarly large draw of 8.7 million barrels, solidifying this trend.
This draw is happening right as the summer driving season begins, suggesting demand is accelerating. U.S. refinery utilization rates have already ramped up to 95.1%, the highest level this year, to meet anticipated fuel consumption. This aligns with recent travel forecasts which project a 5% increase in highway travel for the July 4th holiday week compared to last year.
Positioning for Higher Prices and Market Strategies
In response, we are positioning for higher prices in the coming weeks through derivatives. We are looking at buying August WTI call options with strike prices around $90 and $92. This allows us to capture potential upside from peak summer demand while defining our risk.
For those with a more moderate risk appetite, selling cash-secured puts below the current market price is also attractive. With implied volatility rising after this news, premiums are richer, offering a better return for taking on the obligation to buy crude at a lower price. This strategy benefits if prices rise, stay flat, or even fall moderately.
This strong domestic demand picture is further supported by the global supply situation. OPEC+ has signaled it will maintain its current production cuts through the end of the third quarter. Historically, the combination of disciplined OPEC+ supply and a surprise inventory draw at the start of summer, as seen in June of 2021, often precedes a sustained period of price strength.
