Oil prices moved slightly lower again yesterday, influenced by a surprise crude build that weakened trader sentiments. Positive comments related to US-Iran negotiations, which are happening indirectly in Vienna, are putting downward pressure on the market. The US lifting sanctions on Iran would enable nearly 2 MMbpd of oil to hit global markets, offsetting much of OPEC’s existing cuts.
The focal point of the EIA’s report was a moderate crude inventory build, compared to expectations of a sizable draw. Though national crude inventories rose, stocks in Cushing, OK – the delivery point for WTI crude – fell by over a million barrels, moderating oil price losses. On the products side, diesel inventories fell in line with expectations, and gasoline builds were slightly smaller than expected. Notably, gasoline demand was just 3% off from 2019 levels, a strong reading heading into summer driving season.
Despite effective deployments in some countries like the US, other countries remain in the trenches battling COVID-19. India yesterday posted a record 315,000 new cases as the country has been unable to contain outbreaks. Earlier this week, India imposed a six-day lockdown in New Delhi. Japan is expected to declare a state of emergency in Tokyo and Osaka due to rising cases. Both countries are among the top 5 largest oil consumers in the world, so setbacks will undoubtedly impact global oil demand.