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Oil prices dumped and pumped overnight but are holding gains for now ahead of the official inventory data as traders continue to weigh tightening physical supplies (Brent’s prompt spread strengthening to 95 cents in backwardation, hovering at three month highs) against pressure from higher for longer rates (weighing on the demand side).

Additionally, the ongoing tensions in the middle east are supporting prices.

After last week's huge surprise crude build (and product draws) this week was expected to see more of the same, and API reported a sizable build…

API

• Crude +7.17mm (+3.2mm exp)

• Cushing +668k

• Gasoline +415k (-2.1mm exp)

• Distillates -2.91mm (-1.4mm exp)

DOE

• Crude +3.5mm (+3.2mm exp)

• Cushing +741k

• Gasoline -293k (-2.1mm exp)

• Distillates -4.01mm (-1.4mm exp) – biggest draw since May 2023

The official data reported a smaller crude build than API reported but we also saw the biggest distillates draw since May 2023, (and small gasoline draw)

Source: Bloomberg

The Biden admin added to the SPR for the 10th straight week (+748k barrels)…

Source: Bloomberg

US crude production remains at a record high 13.3mm b/d…

Source: Bloomberg

WTI was hovering right around $78.20 ahead of the print and extended gains after the build…

Oil has remained in a roughly $10 trading range this year as the push and pull of bearish and bullish factors mute volatility.

Attacks on ships in the Red Sea and the Israel-Hamas war have ramped up tensions in the Middle East and added a geopolitical risk premium to prices.

Still, concerns about the outlook for China’s economy and its impact on consumption, as well as the pace of non-OPEC supply growth, are limiting gains.