WTI Steady Near One-Month-Highs After API Reports Big Crude Draw

Oil prices ended the day marginally down from one-month-highs, amid some notable swings intraday, after Libya recently restarted production at its largest oil field.

The pullback in prices came "in conjunction with no new developments in the Red Sea and the opening of Libya's largest oil field," said Rania Gule, market analyst at XS.com.

Ongoing tensions in the Middle East and weather-related oil production disruptions in North Dakota also remain top of mind for traders after Ukrainian drone strikes on Russian Baltic ports - from which Russia exports oil - raised concern.

But, to see the effect of those potential supply bottlenecks, we look to the inventory data.

API

• Crude -6.67mm (-1.4mm exp)

• Cushing -2.03mm

• Gasoline +7.18mm (+1.5mm exp)

• Distillates -245K (-700k exp)

A far larger than expected crude build was offset by another major build for gasoline stocks (4th large weekly build in a row)

Source: Bloomberg

WTI was trading around $74.50 ahead of the API data and was unmoved by the big crude draw offset by the big product build...

“This range-bound trading regime is the ‘kryptonite’ of trend followers,” said Daniel Ghali, a commodity strategist at TD Securities.

The narrow band of activity leads algorithms to buy high and sell low, causing with prices remaining largely unchanged, he said.

"Fundamentally, threats to supply have been elevated for months amid the Israel-Hamas conflict in the Middle East, but worries about fading consumer demand had kept prices subdued near the low end of the 2023 trading range for much of the fourth quarter," said Tyler Richey, co-editor at Sevens Report Research.

Oil market dynamics started to change over the last week, he told MarketWatch.

"The combination of cold weather knocking out a big portion of oil production in North Dakota since late last week, and news of an apparent Ukrainian drone attack on a Russian fuel export that temporarily halted operations at the facility this week, have tipped the fundamental scales in favor of the bulls for the very near term."

Still, a critical oil-market barometer for supply and demand known as the prompt-spread has been bolstered by the increased risks in the Red Sea.

WTI crude’s front-month futures are trading at a 10-15-cent premium to the next contract, near the highest since November, excluding expiration days.