WTI Extends Losses After API Reports Small (Surprise) Crude Build

Oil prices limped lower once again today (5th decline in the last six days) as stocks stalled and a potential cease-fire in Gaza built on mounting concern about the global demand outlook.

On Monday, US Secretary of State Antony Blinken said that Israel accepted a cease-fire proposal and that the next step was for Hamas to agree. In response, the militant group pushed back against the US, denying claims that it was stalling negotiations and saying it was “keen” to reach an accord.

Meanwhile, China’s worsening economic malaise is keeping the market subdued. Recent data showed shrinking factory activity and a decline in oil demand, while the world’s largest importer is also considering a new rescue plan for its beleaguered property sector.

The question is, will last week’s unexpected crude inventory build be confirmed as a one-off or is the macro background fear starting to actually impact physical markets.

API

• Crude +347k (-2.9mm exp)

• Cushing -648k

• Gasoline -1.04mm

• Distillates -2.24mm

For the second week in a row, Crude stockpiles saw an increase, while the all-important hub at Cushing saw another draw and product stocks fell…

Source: Bloomberg

WTI modestly extended losses on the crude build…

“The geopolitical risk premium, which had been inflating prices, started deflating when the U.S. announced that Israeli Prime Minister Benjamin Netanyahu had accepted a bridging proposal to cool tensions between Israel and Hamas,” said Stephen Innes, managing partner at SPI Asset Management, in market commentary.

“A de-escalation in the Middle East could make that risk premium evaporate faster than a puddle in the desert sun.”

Additionally, Powell could mess it all up:

“An economic downturn resulting from a ‘Fed mistake’ would lead to a bear market in the global energy markets,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch.

So “if we start to see economic data deteriorate in the coming weeks or months, demand estimates penciled in based on the optimistic hope of a soft landing will fall considerably amid an emerging recessionary reality.”

Now we just have to wait and see what tomorrow’s official inventory and supply data shows.