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  • WTI ended Tuesday’s session with losses of just under $1.50 or about 2.3%, dropping back from highs above $62.00.
  • API inventories were mixed, with a big build in headline crude oil stocks but a massive draw in gasoline stocks.
  • Crude was unresponsive to reports that OPEC+ has downgraded its oil demand growth forecasts ahead of this week’s meeting.

Front-month futures contracts for the American benchmark of sweet light crude oil, West Texas Intermediary or WTI, ended Tuesday’s session with losses of just under $1.50 or about 2.3%, with WTI dropping back from Asia Pacific session highs above the $62.00 level back to support at $60.00. Just below the $60.00 level is further support in the form of the 50-day moving average, which currently sits pretty much bang on the $59.50 level, a level which came in handy as support on Monday. It seems likely that ahead of Thursday’s OPEC+ meeting, crude oil markets will continue to chop within the bounds of the 21 and 50DMAs (the former sits just above $62.50).

Driving the day

Crude oil markets did not see too much of a reaction to a mixed weekly private API inventory report; headline crude oil stocks saw a much larger than expected build of 3.9M barrels (expected was a tiny 0.1M build). However, gasoline stocks saw a massive surprise draw of 6M barrels (expected was a small 700K barrel build).

Market commentators attributed the pullback from highs to Monday’s news that traffic through the Suez Canal had returned to normal. More likely, Tuesday’s selling pressure was being driven by position squaring ahead of key risk events later in the week, with market participants likely eager to derisk as WTI got closer to its 50DMA in the mid-$62.50s.

For the most part, crude oil markets ignored commentary regarding Tuesday’s OPEC+ Joint Technical Committee (JTC) meeting. Note; this is a technical committee off delegates from OPEC+ nations whose job it is to analyse the situation in oil markets and (sometimes) provide policy recommendations to the oil ministers who make up the OPEC+ cartel. Earlier in the session, it was reported that the JTC had revised lower its estimate for oil demand growth in 2021. OPEC delegates confirmed this to the press after the US market close, saying that the cartel had lowered its forecast for 2021 oil demand growth the 5.6M barrels per day from the 5.9M barrel per day forecast released in the OPEC monthly report just three weeks ago.

The Saudis are reportedly pushing for a rollover in current production curbs through to the end of June and are reportedly also willing to extend their 1M barrel per day involuntary additional cuts for the same time period. However, Russia appears to have signalled that it wants to increase output. They are likely to face pushback from the likes of the Saudis and other cautious OPEC+ members, who will cite the recent downgrade in the oil demand growth forecast, lockdowns in Europe (and other parts of the world) and the recent pullback from highs in prices as reasons to be more cautious and rollover cuts.

Looking ahead, markets expect that caution will prevail and OPEC+ and the Saudis will rollover current output cuts on Thursday. Meanwhile, crude oil market participants will have to remain attentive to demand-side developments such as the path of the pandemic, lockdowns and the vaccine rollout this week, US President Joe Biden’s infrastructure announcement on Wednesday and key US data releases in the form of the March ISM Manufacturing PMI survey on Thursday and the March labour market report on Friday.