WTI Extends Gains After Bigger Than Expected Crude Draw

Oil prices extended their rebound gains today, back above $38, on the back of a weaker dollar and signs that OPEC+ may delay a planned output increase.

“They can’t afford to let prices slip beyond where they were here recently,” said Josh Graves, senior market strategist at RJ O’Brien & Associates LLC.

Meanwhile, “there’s still a lot of optimism that oil in the long-term will be OK, so traders are looking at buying any kind of significant dip in the market.”

This week’s inventory and production data will be heavily influenced by Hurricane Zeta which caused the shut-in of around 85% of Gulf crude production.

API

• Crude -8.01mm (-600k exp)

• Cushing +981k

• Gasoline +2.45mm (-1.1mm exp)

• Distillates -577k (-2.4mm exp)

After a surprise build last week, analysts expected a modest draw (Hurricane Zeta) but instead crude stocks plunged over 8mm barrels…

Source: Bloomberg

Demand is recovering “at a very slow speed,” according to the Organization of Petroleum Exporting Countries’ Secretary-General Mohammad Barkindo.

WTI was hovering just below $38 ahead of the API report and extended gains on

“Lockdowns and economies around the world seem to be getting into another wave of Covid-related stress,” said Stewart Glickman, energy equity analyst at CFRA Research. “If you get another wave that lasts through the winter season potentially, then that’s just another nail in the coffin for demand.”

The forward curves for both Brent and WTI showed some underlying strength beyond the rally in headline prices.