WTI Extends “Hope For More Stimulus” Gains On Surprise Crude Draw

Oil prices rallied along with the rest of the markets today on hope The Fed’s buying will work and optimism that US Congress will agree a bigly Stimulus Bill.

Notwithstanding today’s gains, there are still concerns about the outlook for near term energy demand.

“It is highly questionable whether the good mood will continue on the oil market, however. Not only is there a daily stream of bad news on the demand front; the unprecedented price war between oil producers is also continuing despite the unprecedented demand weakness,” said Eugen Weinberg, analyst at Commerzbank, in a note.

So all eyes are once again on the inventory data for signals of extremes from the global demand collapse.

API

• Crude -1.25mm (+2.5mm exp)

• Cushing +1.066mm

• Gasoline -2.622mm (-2.4mm exp)

• Distillates -1.901mm (-1.6mm exp)

Crude inventories were expected to rise for the 9th week in a row (and distillates draw down for the 11th week in a row) but API reported a surprise crude draw of 1.25mm barrels (ending the streak)…

Source: Bloomberg

“It remains to be seen whether the recovery in equity markets can hold up, but the number of coronavirus cases has yet to peak and the worst of it has yet to visit most of the country,” said Marshall Steeves, energy markets analyst at IHS Markit.

“Thus, the extent of demand destruction remains unknown.” The “risks remain to the downside and WTI could plunge below $20,” he told MarketWatch.

WTI managed gains today and hovered around $24 ahead of the inventory data and extended gains after the print…

“The hope for more stimulus is giving a short-term boost,” said Josh Graves, market strategist at RJ O’Brien & Associates LLC.

“From a fundamentals standpoint, we’re still looking at two cataclysmic supply and demand shocks. Those need to be addressed before we see any sustained rally.”