WTI Holds Losses After Large Crude Build, Huge Gasoline Draw

Oil prices are falling once again as hope for more China demand (stimmies) fade and last night’s huge crude inventory build reported by API (likely storm-related).

The slide in prices overshadowed nervousness about an escalation of hostilities in the Middle East, particularly a possible retaliatory strike by Israel on Iran’s oil facilities following a missile barrage last week.

“Heightened geopolitical risks have supported oil prices and appear likely to continue to do so,” Morgan Stanley analysts including Martijn Rats and Charlotte Firkins said in a note.

“However, the underlying balance has continued to weaken.”

So, the question is, will the official data confirm API’s big builds…

API

• Crude +10.9mm (+1.95mm exp)

• Cushing +1.359mm

• Gasoline -557k

• Distillates -2.59mm

DOE

• Crude +5.81mm (+1.95mm exp) – biggest build since April 2024

• Cushing +1.247mm

• Gasoline -6.304mm – biggest draw since Nov 2023

• Distillates -3.124mm

The official data confirmed API’s reported large crude build (though smaller) but it also showed a huge gasoline draw (largest since Nov 2023) as we suspect Hurricane Helene had some significant impact in the supply chain…

Source: Bloomberg

Including the Biden admin’s 37k barrel add to SPR, this was the biggest aggregate rise in crude stocks since April 2024

Source: Bloomberg

US Crude production rose back to 13.4mm b/d – record highs…

Source: Bloomberg

WTI was trading just below $72 ahead of the official data, and held those losses after…

Morgan Stanley raised its Brent price forecast by $5 to $80 a barrel for the fourth quarter of this year on heightened geopolitical risk. Others have also struck a more bullish tone in recent days, with hedge fund manager Pierre Andurand saying crude could surge $10-$15 in the event of an attack, while Carlyle Group’s Jeff Currie said oil supply risks are the biggest in decades.

“My sense of positioning is that the tourists are long, the options specialists are long options and the normal traders that offset that flow are nowhere to be found as they remain on sidelines,” said Scott Shelton, an energy specialist at TP ICAP Group Plc.