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Oil prices extended gains overnight after EIA confirmed OPEC's report that the world faces a huge supply shortfall.

Demand will eclipse supply by 1.2 million barrels a day on average during the second half, the IEA projected Wednesday. That follows a forecast from the Organization of Petroleum Exporting Countries that the fourth quarter may see the biggest deficit in more than a decade.

The CPI print dragged oil prices lower (hot inflation, hawkish Fed, slower demand) into the DOE print.

API

• Crude +1.174mm (-1.9mm exp)

• Cushing -2.417mm

• Gasoline +4.21mm (-300k exp)

• Distillates +2.59mm (+400k exp)

DOE

• Crude +3.955mm (-1.9mm exp)

• Cushing -2.45mm – 10th weekly draw of last 11

• Gasoline +5.56mm (-300k exp) – biggest build since July 2022

• Distillates +3.93mm (+400k exp)

The official data confirmed API's report – an unexpected crude build and major builds in products (while Cushing stocks continue to draw)

Source: Bloomberg

The Biden admin added to crude stocks at the SPR for the 6th straight week…

Source: Bloomberg

Stocks at the Cushing hub dropped to their lowest since Dec '22…

Source: Bloomberg

US crude production rose to post-COVID highs (despite the ongoing decline in rig count)…

Source: Bloomberg

WTI was trading just below $89 ahead of the official data release.

All of which leaves President Biden with a major problem. Inflation is resurgent (on the back of soaring gasoline prices) and looks set to go higher…

Source: Bloomberg

…but Biden's strategic election-saving reserve is already at its lower limits and the diesel market is pricing in a crisis, one that could get soon get even worse because of a lack of the type of crude that’s good for making the fuel.