A private survey from the American Petroleum Institute (API) shows a significant drop in crude oil inventory. This news comes just before the official figures are released by the US government. Analysts expected a small decline of 0.6 million barrels in crude oil and a slight decrease of 0.1 million barrels in distillates, while they predicted a 0.2 million barrel increase in gasoline stocks. The API’s data is gathered from oil storage facilities and companies. In contrast, the official report from the US Energy Information Administration (EIA) relies on data from the Department of Energy and other sources. The EIA report is usually more accurate and thorough, offering detailed statistics on refinery inputs and outputs and insights into different grades of crude oil storage.

Influence On Oil Prices

Today, geopolitical events are impacting oil prices more than inventory levels. The forthcoming official report may offer additional details that could change market views. The API’s survey indicates a larger drop in oil stocks than expected, suggesting that demand could be higher or supply lower than earlier predictions. This report comes before the EIA’s official statistics, which are considered more definitive due to their robust data collection methods. While API numbers can provide early hints, they might not always align with EIA results, so making decisions based only on the API report is risky. The initial findings suggest a tightening supply situation. Although inventory changes were expected to be minimal—almost stable for distillates and gasoline—a significant drop changes the perspective. However, current international developments appear to have a stronger influence on market sentiment than local inventory changes. In derivative markets, the combination of tight inventory data and external pressures could lead to increased volatility, especially around settlement times and before major economic or political announcements. Traders in front-month contracts may find opportunities in short-term spreads, as dwindling reserves could push prices up in the near term.

Implications For Traders

We recommend focusing on short- to intermediate-term price movements, paying close attention to how spot prices respond to the upcoming EIA figures. Any discrepancies between API and government data should be noted, as they might indicate corrections or highlight real supply changes that longer-term data may not reveal. If there are significant differences between the API and EIA reports, calendar spreads and crack spreads based on supply projections should be re-evaluated. Trading volumes may rise as traders adjust their delta and gamma exposures over time. The inconsistency in the private report could signal a shift in sentiment once official numbers are confirmed. A simple inventory drop could lead to a larger price adjustment if new data supports or expands on this narrative. Monitoring basis movements between Brent and WTI will be crucial to understand where regional tensions are developing. The key takeaway is this: If official data shows a larger decline amidst unstable conditions elsewhere, energy-related contracts may face upward pressure, particularly in options markets focused on volatility. For those holding puts, there is a risk of losing value if the market remains strong. Conversely, layered call spreads could increase in value before being fully reflected in the market. We will monitor how refiners adjust their utilization rates in the next two reports. If utilization increases in response to tighter supply or better margins, it could lead to more demand for feedstock, further impacting inventories. In the upcoming sessions, tracking momentum in heating and transportation fuels will also be important. Seasonal usage patterns are changing, potentially adding new directional drivers based on product type. Overall, this situation is not just about one storage number. It’s about how all these evolving factors interact with the shifting pressures in contracts at both the exchange and OTC levels. Create your live VT Markets account and start trading now.

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