WTI Holds Gains Despite Crude Build, Gasoline Demand Remains Dismal

Oil prices extended gains this morning with WTI back above $86 as traders shrugged off a surprise crude build reported by API and ignored President Biden’s pledge to maintain efforts to curb prices.

“Underlying fundamentals remain strong as confirmed by the IEA in their monthly report,” said Ole Hansen, head of commodities strategy at Saxo Bank. “But with technical indicators flashing overbought, a period of consolidation may soon emerge.”

Oil has surged since the end of November as stronger-than-expected demand and supply outages tightened the market, leading to buyers in Asia paying much higher premiums for spot cargoes. Goldman Sachs is forecasting a return to $100 crude in the third quarter, while the International Energy Agency said consumption is on track to hit pre-pandemic levels.

In the U.S., a blast of cold air across southern Texas is set to pass near one of the country’s major oil-producing regions. The front will raise concerns for power-grid operators and natural-gas drillers

API

• Crude +1.404mm (-1.75mm exp)

• Cushing -1.496mm

• Gasoline +3.463mm (+2.4mm exp)

• Distillates -1.179mm (-1.1mm exp)

DOE

• Crude +515k (-1.75mm exp)

• Cushing -1.314mm

• Gasoline +5.873mm (+2.4mm exp)

• Distillates -1.431mm (-1.1mm exp)

The official data confirms API’s report with an unexpected crude inventory build last week (+515k vs -1.75mm exp). Cushing also saw stocks drop for the second straight week and gasoline inventories surged for the third straight week…

Source: Bloomberg

Gasoline demand rebounded very very modestly last week…

Source: Bloomberg

US Crude production was unchanged for the 2nd straight week, hovering near its highest since May 2020

Source: Bloomberg

WTI hovered around $86.40 ahead of the official data and while it chopped around a bit, is holding the gains after the report…

Finally, it appears President Biden’s pledge to curb gas prices is going to be challenged by the market as crude and wholesale gasoline prices resurge…

Source: Bloomberg

The U.S. can work to accelerate the release of strategic reserves, White House National Economic Council Director Brian Deese told Bloomberg TV. Yet many of Biden’s options to address the rally would be limited and likely short-lived.