The latest weekly American Petroleum Institute (API) inventory data for the week ending April 14th reported a draw of 0.84 million barrels. This was the third successive draw following a drop of 1.30 million barrels last week, but only the 5th decline in stocks in the last 14 weeks.
Consensus forecasts were also for a larger draw in inventories of around 1.5 million barrels and there was market disappointment on release.
Distillate registered a draw of 1.8 million following a decline of 1.6 million barrels in the previous reporting period.
Gasoline inventories, however, recorded a build of 1.4 million barrels after a draw of 3.7 million barrels last week which broke the run of draws and, in contrast to recent weeks, the fuel data overall was unable to provide significant support to prices.
Cushing recorded a draw of 0.67 million barrels, only the second draw since the beginning of March.
Oil prices dipped lower in early Europe on Tuesday with further concerns surrounding rising US shale production while a generally weak tone in commodity prices also pulled prices lower. There was, however, some optimism surrounding potential demand from China while geo-political concerns had a mixed impact.
WTI dipped to 11-day lows around $52.20 with choppy trading conditions in New York within a $52.20-52.80 range.
There is underlying optimism that excess inventories will be drawn down over the next few months, but the situation is complicated by rising US output. In this context, a sustained fall in US inventories would be important in underpinning sentiment.
From around $52.60 p/b ahead of the release, prices immediately responded with a decline to the $52.40 area with losses extending to $52.25, although a draw may be seen more favourably in later trading.
Wednesday’s EIA release will be important, especially given expectations that US production will continue to increase. Sentiment surrounding crude will be undermined significantly if there is any reported increase in stocks to fresh record highs.