The American Petroleum Institute (API) conducted a private survey on US oil stock. Expectations were for a reduction in headline crude by 2 million barrels, distillates by 0.6 million barrels, and gasoline by 1.1 million barrels. The survey includes data from oil storage facilities and companies.<\/p>\n
In contrast, official data from the US Energy Information Administration (EIA) is due. This report is based on data from the Department of Energy and other government agencies, offering a comprehensive overview. The EIA data provides details on refinery inputs and outputs, and storage levels for various grades of crude oil, including light, medium, and heavy.<\/p>\n
The API report provides insights into total crude oil storage levels and weekly variations. Meanwhile, the EIA report is considered more accurate, giving a detailed analysis of the oil market. It covers significant indicators impacting oil storage levels and market conditions more broadly. These reports offer different perspectives on the oil market.<\/p>\n
We see the private survey numbers, which often set the initial tone for the market before the official data is released. However, the government’s EIA report tomorrow morning is what really moves prices, as it’s considered far more comprehensive and accurate. The key for us is how much the EIA report differs from both these private numbers and the market’s expectation of a 2 million barrel crude draw.<\/p>\n
Given the potential for a surprise, we are looking at options strategies that can benefit from a sharp price swing in the next few days. A large deviation from expectations in the EIA report could cause significant volatility, making a play on that volatility attractive before the numbers are released. For instance, buying both a call and a put option on a major oil ETF could pay off if the price moves sharply up or down tomorrow.<\/p>\n
We also have to remember the date, as we’re just past the Labor Day weekend which marks the end of the peak US summer driving season. Gasoline demand is expected to decline seasonally through September, which could soften the impact of any draw in gasoline stocks. Recent jobs data that came in slightly weaker than forecast also adds a layer of concern about overall economic demand heading into the fourth quarter.<\/p>\n
On the supply side, the market remains nervous about any potential disruptions in the Gulf of Mexico during this peak hurricane month. Looking back at the production shut-ins from Hurricane Ida in 2021, we know these events can quickly tighten the market for weeks. This is happening as we wait for signals from the next OPEC+ meeting, with their current production cuts holding WTI crude prices firm around $86 per barrel.<\/p>\n
So while tomorrow\u2019s inventory report is the immediate catalyst, it\u2019s being viewed against a backdrop of tight existing supply. U.S. crude inventories are already sitting about 4% below the five-year average for this time of year, making any large draw more significant. A larger-than-expected draw would confirm this supply tightness and likely push prices higher, despite the seasonal demand slowdown.<\/p>\n
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