WTI Extends Gains After US Crude Inventory Tumbles To 6-Month-Lows

Oil prices have surged overnight following the assassination of Hamas’ political leader in Tehran. This geopolitical risk premium surge came on top of an across the board inventory draw reported by API last night.

Traders are watching for confirmation of the drawdown trend in US crude stocks from the official data this morning.

API

• Crude -4.495mm (-3.9mm exp)

• Cushing -929k

• Gasoline -1.917mm (-1.6mm exp)

• Distillates -322k

DOE

• Crude -3.44mm (-3.9mm exp)

• Cushing -1.1mm

• Gasoline -3.67mm (-1.6mm exp)

• Distillates +1.53mm

US crude inventories fell for the 5th straight week, dropping 3.44mm barrels and stockpiles at the Cushing Hub also declined (for the 4th straight week)

Source: Bloomberg

That drawdown has dragged total US crude stocks to their lowest since February…

Source: Bloomberg

The Biden administration added 685k barrels to the SPR last week (which offset the big commercial draw modestly)…

Source: Bloomberg

US crude production remains at a record high, despite the accelerating trend lower in rig counts…

Source: Bloomberg

WTI is extending gains on the day after the oficial data…

The market has been assessing the risk that fresh escalation could affect production and exports, including from Iran. Crude prices haven’t reacted particularly sharply to recent developments in the war, which started in early October 2023.

“Right now, putting $2 of geopolitical risk premium back in the market is telling me the market is covering shorts, but not worried about a real supply event,” said Rebecca Babin, senior energy trader at CIBC Private Wealth.

In a sign that oil traders are hedging against further conflict, Brent call volumes were the highest since early June on Tuesday. A gauge of market volatility is also the highest since the start of the summer.