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  • WTI has been choppy in recent trade, nearly hitting $65.00, but has recently dropped back to the mid-$63.00s.
  • Selling has picked up in wake of the latest EIA inventory report that showed US production levels surging back.

Crude oil prices have been choppy over the last few hours and has recently swung back to trade in the red again. Front-month futures contracts for West Texas Intermediary (WTI), the American benchmark for sweet light crude oil, have been capped before the $65.00 level, hit session highs of close to the $65.00 level not long ago, but have since sold off and been pushed back below the $63.50 level, where WTI trades losses of about 0.75% or 50 cents on the day. WTI is now eyeing a move back towards and test of earlier session lows of just above the $63.00 level.  

Driving the day

The latter part of Monday and Tuesday’s sessions were pretty ugly for the crude oil complex; prices were under pressure amid a combination of profit-taking with crude prices at cycle highs, concerns over increasing oil production/refinery activity in Texas (as the region continues to recover from February’s cold weather-related disruptions) and “bearish” oil demand growth forecasts in yesterday’s US Energy Information Agency, who released their monthly Short-Term Energy Outlook report and cut oil demand growth forecasts for 2021 (though increased them for 2022).

In terms of Wednesday’s session; with the US dollar under pressure in recent hours (particularly in wake of softer than anticipated US inflation numbers), WTI had been nursing a modest recovery. Prices were sent crashing from a bad newswire translation suggesting that Russian Energy Minister Alexander Novak had signalled that Russia would be hiking crude oil output by 890K barrels per day in May. This triggered fears that Russia was about to pull out of the OPEC+ agreement. However, a newswire correction soon revealed that Novak had actually been referring to the increase in output in May 2021 versus a year earlier. Within a few minutes, the entire move, which had seen crude oil drop from the upper $64.00s to the mid-$63.00s, reversed.

However, crude oil prices have since been on the back foot and it seems as though the latest official weekly crude oil inventory report from the US Energy Information Agency (EIA) is not helping; as indicated by Tuesday’s private API inventory report, there was a big build in headline crude oil stocks (of 13.798M barrels), while there was a huge draw in gasoline (of 11.869M barrels) and distillates (of 5.5M barrels). This is all as a result of disruptions to refinery activity in the US following the “deep freeze” in the final weeks of February. The most important aspect of the report, however, and likely what has been weighing on crude oil markets is the fact that US production jumped by 900K barrels per day back to 10.9M barrels per day.