WTI Experiences a Dip Toward Six-Month Lows Following API Reports of Inventory Builds

Oil Prices Stall Amid Market Fluctuations

Oil prices experienced a brief pause in their recent downward trend today, with WTI stopping its fall around the $73 mark, just shy of a six-month low. This pause coincided with a bounce in stocks and an increase in Treasury yields, which provided temporary support for crude oil prices.

Concerns Over Crude Demand

Despite this respite, concerns persist regarding the future demand for crude in China and the U.S. Late last week, a series of weaker-than-anticipated economic data triggered a selloff in the stock market and put pressure on oil futures, according to analysts.

Impact of Middle East Developments

However, the potential for retaliation from Iran, following the assassination of a top Hamas official in Tehran - which Iran attributes to Israel - seemed to limit any further decline. U.S. officials have urged Tehran to avoid escalating the conflict. Analysts from Goldman Sachs Group Inc., including Daan Struyven, noted that oil prices have been falling in tandem with equities, showing limited reaction to events in the Middle East.

Crude Inventory Draws

Looking ahead, the key question is whether the recent trend of crude inventory draws will continue. The API reports indicate the following:

• Crude: +0.18mm
• Cushing: +1.07mm
• Gasoline: +3.31mm
• Distillates: +1.22mm

These figures suggest that the five-week streak of crude inventory draws has ended, with the API reporting builds across the entire energy complex.

WTI Trading and Future Predictions

WTI was trading around $73 prior to the API print and dipped slightly lower, moving back toward six-month lows, following the reported builds. However, the U.S. Energy Information Administration (EIA) forecasts that crude oil prices will rebound from these recent losses as global inventory draws pick up pace in the second half of the year.

The EIA stated in its monthly Short-Term Energy Outlook on Tuesday, "Despite recent falls in crude oil prices, we continue to expect crude oil prices to rise in the second half of 2024." The agency predicts that the international benchmark Brent will return to between $85 and $90 a barrel by the end of the year.

The EIA also anticipates that withdrawals from global oil inventories will double to 800,000 barrels a day in the second half of the year, up from an estimated 400,000 barrels a day in the first half. A return to moderate inventory builds is expected in mid-2025.

Bottom Line

With the recent dip in WTI and the end of a five-week streak of crude inventory draws, the oil market is certainly experiencing some turbulence. However, predictions from the EIA suggest a potential recovery in the second half of the year. What are your thoughts on these developments? How do you see the oil market evolving in the coming months? Share this article with your friends and discuss these important issues. Don't forget to sign up for the Daily Briefing, delivered to your inbox every day at 6pm.