EIA Reports -1.662 Million Barrel Draw On U.S. Supply

A bit earlier today, the U.S. Energy Information Administration (EIA) released its weekly inventory report. The figure came in at -1.662 million barrels, beneath expectations (-1.050 million) and the previous release (-0.426 million). On Tuesday, the American Petroleum Institute (API) reported a -0.439 million barrel week-over-week drop. The API’s number beat projections (-1.279 million barrels) but was down big from last week (+0.620 million).

All in all, today’s EIA number fell in line with the summer seasonality of crude oil. The peak demand season for refined fuels is due to kick off this weekend with the Memorial Day holiday. If we see U.S. supplies continue to fade, be on the lookout for a steep June rally in WTI and USOIL.

At press time, CME July WTI futures are off slightly, trading just beneath $66.00. Traded volumes have been decent, with the July/August ratio coming in at a bit over 3/1. Normal futures backwardation is in effect, with August WTI trading at a $0.25 discount over July.

WTI Crude Oil Rallies Following EIA Release

Since the EIA weekly inventories report went public (three hours ago at press time), July WTI has rallied $0.70. This is an interesting move and one that suggests bidders are ready to act on any bullish market driver.

Overview: In the coming weeks, we’ll be entering the peak time of year for crude oil pricing. Given the weakened USD, COVID-19 reopenings, and increased demand for refined fuels, a bullish bias toward crude oil is warranted. However, it’s not unprecedented to see a pre-Memorial Day pullback in WTI and USOIL. If a significant retracement comes to pass in the next few sessions, a longer-term bullish position trade may set up. 

Stay tuned to FX Leaders for ideas on how to play peak demand seasonality in the global oil complex.

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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