WTI Tumbles Into Red After Surprise Gasoline Build, Productin Increase

Oil prices rollercoastered overnight, after a 4-day losing streak (the longest since March), rebounding after a dip following API’s reported smaller than expected crude draw, and now fading back into the red ahead of the official inventory data (as early dollar weakness turned to strength).

The International Energy Agency last week said it expects oil demand to fall by more than half a million barrels per day in the second half of this year, even as OPEC+ continues with plans to add 400,000 bpd of additional supply monthly as the end of the U.S. driving season approaches, lowering the call for gasoline and raising concern over prices going forward.

We doubt that all the negative factors are fully priced in, and think prices had overshot their fundamental values in the past anyway. Thus, the selling pressure is likely to continue for a while yet, and with the potential breakdown of key support levels, we may see increased technical selling activity too. As a result, oil prices could fall more abruptly going forward,” Victor Argonov, senior analyst at International Fintech EXANTE, said in a note.

Wil the official data ignite the momentum for the algos?

API

DOE

Official inventory data shows a notably bigger than expected crude draw last week (-3.23mm vs API’s reported 1.163mm draw), Gasoline stocks rose but Distillates drewdown…

Source: Bloomberg

US crude production rose modestly last week, but continues to behave itself, despite still high prices and rising rig counts. Still, US crude production is at its highest since May 2020…

Source: Bloomberg

WTI slipped back to unchanged at around $66.25 ahead of the official data print.

Finally, we note that Bloomberg Intelligence’s Senior Energy Analyst Vince Piazza warns that “Crude consumption growth is cresting as the market faces the waning days of summer travel season while the delta variant of Covid-19 makes its way around the globe, the biggest hurdle to tighter balances. Drilling in major U.S. oil basins remains robust, and the backlog of uncompleted wells continues to fall, which should support output. Yet it seems likely growth will be muted as capital is rationed.”