The latest US weekly oil report shows that crude oil inventories dropped by 4,304K barrels, which is much more than the expected decrease of 1,035K barrels. Last week, inventories went down by 2,795K barrels. Gasoline stocks increased by 5,219K barrels, far exceeding the predicted rise of 609K barrels. Distillate inventories also went up by 4,230K barrels, compared to the expected increase of 1,018K barrels.

API Data Summary

Recent API data revealed a 3,300K barrel decrease in crude oil inventories. Gasoline stocks rose by 4,700K barrels, while distillate inventories grew by 760K barrels. Initially, oil prices fell after this news but quickly recovered. Prices are currently up by about 40 cents. These figures suggest a tighter crude oil market than expected, despite an accumulation of refined product stocks. In summary, crude oil is being drawn from storage more quickly, indicating solid demand from refiners and abroad. Conversely, gasoline and distillate stocks have increased more than anticipated, suggesting refineries are producing more than the current consumption levels. The American Petroleum Institute had already indicated a similar decline in crude, so the market’s initial dip before rebounding shows the overall mood’s complexity. Traders reacted quickly to stockpile changes, but the data presented mixed signals: the crude draw pulls prices one way, while large builds in products push them back. The slight price rebound of about 40 cents indicates that traders are still responding to these mixed signals.

EIA Figures and Market Response

EIA figures provide a deeper analysis and emphasize the significant build in products. This situation isn’t ideal for traders expecting tighter balances, as product demand seems sluggish. This may cap how much crude can rise independently. We also need to consider the time of year. With the US driving season approaching, fuel consumption typically increases. This makes the gasoline stock build surprising and possibly short-lived, suggesting refiners may have overestimated their production needs. Given recent market reactions and inventory trends, the future looks uncertain. We are seeing tightening in refined products, but rising product stocks could reverse some of those gains. If refined product inventories grow faster than crude inventories fall, it could lead to a period where crack spreads weaken. Timing trades around refinery maintenance could help maximize profits if refining throughput decreases. Refined product yields are crucial now. If margins stay under pressure, refiners may have less incentive to operate at full capacity. This could reduce the rate of crude drawdowns and shift market dynamics in the coming days. The market sentiment is not strongly leaning in one direction, which may explain the sluggish reaction. However, underlying volatility could be a concern. The opposing trends between crude and product inventories suggest potential price dislocations, especially for near-term contracts that react quickly to storage conditions. Unless there are sudden changes in production policy or geopolitical events, we expect these dislocations to adjust before trades start to look further out. In the coming days, we should pay close attention to refinery utilization rates and how they change in monthly reports. These figures will provide insights into future drawdown rates and the sustainability of current consumption trends. Watching for any deviations in implied product demand may give early signals for market positioning. Also, assessing backwardation or contango in response to next week’s metrics could clarify how traders view short-term physical supply tightness. Create your live VT Markets account and start trading now.

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