After an ugly slide as Europe opened, oil prices have rebounded as China’s rollback of some COVID-19 measures boosted the outlook for energy demand and traders are optimistic that the official inventory data this morning matches API’s big crude draw.
“Traders have been looking for more positive news when it comes to China’s zero-tolerance COVID policies,” said Naeem Aslam, chief market analyst at AvaTrade, in a market update. And now “we have heard from the officials about a further easing of those measures,” providing support to investor sentiment.
Oil’s swings overnight have left WTI trading right where it was before the API data.
API
Crude -6.246mm (-3.884mm)
Cushing +30k – first build in 5 weeks
Gasoline +5.93mm
Distillates +3.55mm
DOE
Crude -5.186mm (-3.884mm)
Cushing -373k
Gasoline +5.319mm (+2.9mm exp) – biggest build since July 2022
Distillates +5.159mm (+1.9mm exp) – biggest build since May 2020
The official data confirmed API’s reporting with a fourth straight week of sizable crude draws and fourth straight week of significant and growing product builds…
Source: Bloomberg
Gasoline inventories continue to soar amid weak demand heading into the holidays. The four-week moving average of product supplied has plunged by 400,000 barrels a day over the last three weeks. Coupling that with ultra-high refinery utilization has finally given fuelmakers the chance to restock crude product inventories.
Source: Bloomberg
The four-week rolling average of distillates demand fell to its lowest seasonal level since 2015.
US Crude production rose to cycle highs at 12.2mm b/d…
Source: Bloomberg
WTI was hovering around $74.50 ahead of the official data and slipped lower on the big product builds…
Concerns about the global growth outlook, alongside a soft physical market and falling liquidity have weighed on prices, but Francisco Blanch, head of commodity and derivatives research at Bank of America said in a Bloomberg TV interview that “inventories remain quite low, spare capacity is tight,”
“All the demand growth that we forecast for next year is coming from emerging markets.”
Traders are “fleeing the market” because of the “absurd” price actions oil has recently experienced, Ed Morse, global head of commodity research at Citigroup Inc., said in a Bloomberg Television interview.
“We are getting toward the end of the year, and those who made money this year did not want to lose any.”
The oil market’s structure has also been in freefall, with one gauge of US trading at its weakest level in two years, pointing to ample near-term supply.
Finally, we note that gasoline pump prices have largely fallen to parity with where they were a year ago, yet demand has continued to lag.
This shows that it’s higher consumer inflation overall that’s curbing fuel consumption, as well as improving fuel efficiencies in vehicle fleets.
