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WTI Extends Gains Above $57 After Bigger Than Expected Crude Draw

Courtesy of ZeroHedge View original post here.

WTI rebounded dramatically this morning (on headlines about talks resuming between China and US) from overnight weakness driven by a surprise crude inventory build reported by API.

“Oil coat-tailed the overnight dialing down of global political tensions and the rotation out of defensive macro positioning,” Jeffrey Halley, a senior market strategist at Oanda Corp., said in a note. More direction will come from official U.S. crude-inventory data later on Thursday, he said.

But after last night's API data, we suspect the algos will find it hard to ignore if DOE confirms a build.

API

  • Crude +401k (-2mm exp)

  • Cushing -238k (-2.4mm exp)

  • Gasoline -877k (-1.5mm exp)

  • Distillates -1.2mm (+500k exp)

DOE

  • Crude -4.77mm (-2mm exp)

  • Cushing -230k (-2.4mm exp)

  • Gasoline -2.396mm (-1.5mm exp)

  • Distillates -2.538mm (+500k exp)

After last week's huge draw, analysts still expect another draw (even after API reported a build) and DOE confirmed it (more than expected). For the second week in a row, there were inventory draws across the board…

Source: Bloomberg

For US crude production, the market wasn’t expecting another rise after the 200k b/d gain seen for the week ending Aug. 23 because “its hard to keep pace of growth due to constraints in deploying human logistics resources to individual projects,” Bart Melek, head of global commodities strategies at TD Securities in Toronto, says. Production inched lower on the week, still notably decoupled from the plunging rig counts…

Source: Bloomberg

WTI traded around $57 ahead of the DOE data (still notably higher than the post-API lows overnight), and surged to 3-week highs after the DOE showed a draw…

“Right now, the market isn’t only following fundamentals. It’s very perceptive to the ongoing trade war,” and that’s affecting demand, said Paola Rodriguez-Masiu, an analyst at Rystad Energy.

“You can’t discard the possibility that China and the U.S. will continue to raise the levies again,” she added.

Vincent G Piazza, Bloomberg Intelligence's senior energy analyst concludes, concerns about longer-term demand — not weekly inventories  — will continue to drive the oil narrative. U.S. volume is resilient, but subdued expectations are likely to impede growth as capital is removed from the market. Trade conflicts, Middle East tension and fears of a recession hitting key economies remain overhangs, along with E&P equities continuing to trail oil prices.


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