Oil Survives Epic U.S. Stockpile Build to Rise on Technicals

By Barani Krishnan

Investing.com -- The oil market has had its biggest U.S. stockpile build in nearly five months but crude prices rose Thursday instead of plunging, as traders compensated for this week’s brutal selloff by sending the market up — albeit, modestly, given the inventory data.

U.S. fuel products gasoline and distillates also rose last week, though at levels nowhere near to expectations, the Weekly Petroleum Status Report of the Energy Information Administration showed.

Oil bulls tried to attach a reason for Thursday’s market rebound after the Tuesday-through-Wednesday selloff that forced crude prices to settle the previous session at their lowest in seven months.

Some used Vladimir Putin’s warning from a day ago that he will shut down all energy exports from his country should there be more clampdowns on Russian selling prices of oil and gas. 

Others pointed to the U.S. Strategic Petroleum Reserve, which again saw a large outflow of 7.5 million barrels last week that brought the stockpile there to 442.5 million — its lowest since November 1984. The Biden administration has been drawing down the SPR since November last year to make up the shortfall in crude supply on the domestic market for fuels.

But the best excuse seemed to be a technical rebound.

“Yes, oversold is a good excuse and a valid one here,” said Sunil Kumar Dixit, chief technical strategist at SKCharting.com. “But the upside for WTI seems limited at $86 and less likely to test $90. On the flip side, a rejection at $90 could again open the doors to a downside of $77.”

WTI, or New York-traded West Texas Intermediate, settled up $1.60, or 2%, at $83.54 per barrel, after Wednesday’s 5.7% plunge. 

Brent, the London-traded global benchmark for oil, settled up $1.15, or 1.3%, at $89.15, after the previous session’s 5.2% drop.

With the rebound, WTI remained 36% lower from the 14-year high of $130.50 it hit on March 7 after the West’s initial sanctions on Russian energy exports in the aftermath of Putin’s Ukraine invasion.

Brent remained 56% lower than its March peak of $139.13.

Crude oil inventories rose by 8.844 million last week, the highest for a week since the week ended April 8, when there was a build of 9.382 million. Industry analysts tracked by Investing.com had expected a crude drawdown of 250,000 barrels instead for last week. The crude build indicated weakening demand for fuels with the winding down of the peak summer travel period.

Inventories of gasoline, America’s top automobile fuel, climbed by a modest 333,000 barrels against expectations for a draw of 1.667 million barrels.

Stocks of distillates — the oil variant required for making the diesel needed for trucks, buses and trains, as well as the fuel for jets — rose by 95,000 barrels, less than the rise of 530,000 that had been expected. 

Exports of U.S. crude, another important component of the weekly data, slowed to 3.433 million barrels per day (bpd) last week from the prior week’s 3.967 million bpd.