WTI Leaks Lower After Crude, Gasoline Builds

Solid risk-on moves in stocks, a weaker dollar, and a disruption along the Keystone pipeline were enough – in thin liquidity – to send oil prices notably higher (WTI back above $100).

“Right now liquidity is thin, people are away on holiday, there’s more machines than humans,” Amrita Sen, co-founder of consultant Energy Aspects Ltd., said in a Bloomberg Television interview.

“We can continue to trade in this very technical band. But structurally this is a market defined by underinvestment.”

Oil markets have been volatile in recent weeks as traders navigated concerns that a looming recession would hurt demand and the fallout from a stronger dollar against the signs of tight physical supplies.

Signals of demand destruction are showing up in inventory data and all algo-eyes will be tonight’s API print for a hint of what’s to come tomorrow…

API

Crude +1.86mm

Cushing +523k

Gasoline +1.29mm

Distillates -2.153mm

If API is confirmed during tomorrow’s DOE data, then this would be three straight weeks of crude builds (and rising stocks at Cushing). Gasoline inventories also built for a second straight week…

Source: Bloomberg

WTI hovered around $100.60 ahead of the API print and slipped very modestly lower on the builds…

The kingdom’s foreign minister said there is no lack of oil on the market, but a lack of oil refining capacity to turn it into fuels.

“The whole concept of going to Saudi Arabia to ask for extra production is sort of impractical,” Fereidun Fesharaki, chairman of industry consultant FGE, told Bloomberg TV, noting that the kingdom has already been pumping crude at close to its historical peak, with relatively little spare capacity likely left to tap.

“If there’s no buffer in the market, the prices will go haywire.”

For now, US retail gas prices are back below $4.50, but still over 20c higher than when Biden unleashed the SPR.