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WTI Holds Day’s Big Gains After Surprise Crude Draw

Courtesy of ZeroHedge View original post here.

Oil prices soared once again today on hopes that OPEC+ producers are heading toward a consensus on extending output curbs. However, as Bloomberg notes, oil’s rally is prompting some U.S. producers to open their taps once again.

“If everybody magically decides to turn the taps back on and lets the oil back to the surface, now you’ve got 1.5 million to 2 million barrels a day that needs to find a home,” said Stewart Glickman, an energy analyst at CFRA Research.

So once again, all eyes on inventory data to see if last week's surprise surge in crude stocks was an outlier or a start of a new glut…

API

  • Crude -483k (+3.5mm exp)

  • Cushing -2.2mm

  • Gasoline +1.7mm (-800k exp)

  • Distillates +5.9mm (+2.8mm exp)

After last week's surprise build, analysts expected another rise in crude stocks in the latest week but instead API reports a small 483k draw…

Source: Bloomberg

"While supply cuts can help clear the stockpiles and support the prices, the mid-to-long term recovery depends upon significant factors including the consumer confidence, vaccine development (to prevent a second peak), the trade tensions between the U.S. and China and, in a way, the U.S. elections," said Mihir Kapadia, chief executive officer of Sun Global Investments.

"Global trade has been hurt by political factors the last three years, and unless significant change happens this end of the year, protectionism will only escalate and disrupt everything from supply chains to regional demand," he said in emailed commentary.

Futures settled at their highest since March 6 on Tuesday, the day the Saudi-Russian alliance broke down just as a global pandemic dimmed the outlook for demand.

And hovered around $36.80 ahead of the API print holding that level after the surprise draw…

Critically, the rapid rise in oil has ruined any chances of long-term strength as shale producers begin to pump again: “It will be a question of how much price gains do you really want with the risk of the return of U.S. shale oil?” said Olivier Jakob, managing director of Petromatrix GmbH.


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