US oil inventories drew across the board in the weekly, private inventory report, according to ZeroHedge.
Expectations for tomorrow's EIA report:
- Crude +1380K
- Gasoline -1114K
- Distillates -2167K
WTI crude oil fell $2.21 to $83.25 on Tuesday but it's higher on the data, up to $83.70 on a surprise draw in crude. The SPR release was reportedly much smaller than the 1 mbpd pace at around 3.6 million barrels.
Energy will be in focus once again tomorrow with President Biden promising to unveil something to bring gasoline prices down. There are reports that he will announce plans to sell more oil from the Strategic Petroleum Reserve according to Reuters. He will also announce plans to refill the SPR, which could help put a floor under longer-dated contracts.
The problem is that the administration doesn't seem to realize that oil prices don't necessarily dictate gasoline and diesel prices. Huge demand for diesel from Europe and the lack of US refining capacity is putting upward pressure on product prices that no amount of additional oil will help. Diesel right now is trading at $200/barrel.
One option is to limit fuel exports but that would put Europe and other US allies in a difficult position.
Also perhaps misunderstood is that Washington has already authorized a full 180 million barrels from the SPR. The 15m in sales announced is the process of marketing that additional crude, which was already expected. It's unclear if more will be added or if tomorrow's announcement will simply be window dressing.
Expectations for tomorrow's EIA report:
- Crude +1380K
- Gasoline -1114K
- Distillates -2167K
Technically, WTI broke below the 61.8% retracement level of the OPEC+ rally today but didn't close below. It's bearish, but there's still some hope for the bulls. As I warned at the start of the month, October is the worst month for crude, seasonally.
