Oil Prices Bounce Back After Inventory Reductions

Despite the lower Consumer Price Index (CPI) and weak retail sales, oil prices have seen a dip. This is surprising, given the significant reduction in inventory reported by the American Petroleum Institute (API). The International Energy Agency's (IEA) revised demand forecast for 2024 seems to be the primary factor driving prices down.

World Oil Demand Projections

The IEA predicts that world oil demand will increase by 1.1 million barrels per day this year, a decrease of 140,000 barrels per day from last month's forecast.

Global Crude Inventories

March saw a surge in global crude inventories by 34.6 million barrels. This increase is attributed to trade disruptions which pushed oil on water to a post-pandemic high, as per the IEA.

API and DOE Data

The focus now is whether the official data will corroborate API's significant crude draw and reinvigorate prices. The API reported a crude draw of 3.1 million barrels, while the Department of Energy (DOE) reported a draw of 2.508 million barrels.

Crude Stocks

The official data indicates inventory reductions across the board, with crude stocks down by 2.5 million barrels.

US Crude Production

The Biden administration continues to contribute to the Strategic Petroleum Reserve (SPR), adding 593,000 barrels. Meanwhile, US crude production remains steady, close to record highs at 131.1 million barrels per day.

WTI Trading

West Texas Intermediate (WTI) was trading just above $77 before the official print and rallied further on the inventory reductions.

Refinery Utilization Rates

Refinery utilization rates have risen above 90%, the highest since January. Rates have increased in all regions, with the Midwest rising for the second consecutive week to 90.8%, up from 85.2% the previous week, as refineries emerge from maintenance.

Closing Thoughts

The dynamics of the oil market are complex and ever-changing. The recent dip in prices, despite a draw in inventory, highlights the multifaceted factors influencing this commodity's value. The question remains: will these inventory reductions be enough to sustain the rebound in oil prices? We'd love to hear your thoughts on this topic. Share this article with your friends and engage in the discussion. Don't forget to sign up for the Daily Briefing, delivered to your inbox every day at 6pm.