Oil extended gains and approached four-week highs, supported by an unexpected decline in U.S. crude inventories and persistent geopolitical tensions that keep international markets on edge.
The price of WTI has once again surpassed $70 per barrel, its highest level in nearly a month. This bullish move is mainly driven by a 3.3 million barrel drop in U.S. commercial inventories, a figure that doubles analysts' initial expectations of only a 1.6 million barrel reduction.
This significant inventory drawdown, reported by the latest release from the Energy Information Administration (EIA), reflects a robust domestic demand, largely fueled by increased activity at U.S. refineries. Over the past week, these facilities boosted their daily processing to an average of 15.8 million barrels, reaching a utilization rate of 87%, a considerable rise from the previous period.
Similarly, there was a further decline in key refined product stocks: gasoline fell by 1.4 million barrels, while distillates dropped by 0.4 million barrels. These reductions suggest a healthy recovery in fuel consumption, though differences remain compared to historical averages: gasoline inventories are still 2% above the five-year average, while distillates remain a concerning 7% below.
For oil-exporting countries like Mexico and Colombia, this situation presents a significant opportunity. Although average U.S. crude imports remain 11% below the same period last year, a sustained recovery could positively boost the economic outlook of these nations, offering key revenue amid a globally uncertain economic context.
However, geopolitics remains a key player in the evolution of the oil market. The U.S. threat to impose 25% tariffs on Venezuelan crude imports has added pressure on the trade flow to China, the main buyer of Venezuelan oil. At the same time, new sanctions on Iran could further tighten global supply, once again placing Saudi Arabia in a position to cover any supply shortfall.
Moreover, recent agreements between the U.S., Ukraine, and Russia to reduce attacks on energy infrastructure suggest an effort to partially stabilize the market; however, any breakdown in these negotiations could quickly reintroduce volatility in oil prices.
Overall, while economic risks from trade tensions persist, the current balance between strong U.S. demand and supply constraints due to geopolitical factors is creating a bullish environment for oil. The energy market continues to show clear signs of strengthening, suggesting that prices could remain firm in the short term, with close monitoring of any unexpected shifts in the global landscape.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
The price of WTI has once again surpassed $70 per barrel, its highest level in nearly a month. This bullish move is mainly driven by a 3.3 million barrel drop in U.S. commercial inventories, a figure that doubles analysts' initial expectations of only a 1.6 million barrel reduction.
This significant inventory drawdown, reported by the latest release from the Energy Information Administration (EIA), reflects a robust domestic demand, largely fueled by increased activity at U.S. refineries. Over the past week, these facilities boosted their daily processing to an average of 15.8 million barrels, reaching a utilization rate of 87%, a considerable rise from the previous period.
Similarly, there was a further decline in key refined product stocks: gasoline fell by 1.4 million barrels, while distillates dropped by 0.4 million barrels. These reductions suggest a healthy recovery in fuel consumption, though differences remain compared to historical averages: gasoline inventories are still 2% above the five-year average, while distillates remain a concerning 7% below.
For oil-exporting countries like Mexico and Colombia, this situation presents a significant opportunity. Although average U.S. crude imports remain 11% below the same period last year, a sustained recovery could positively boost the economic outlook of these nations, offering key revenue amid a globally uncertain economic context.
However, geopolitics remains a key player in the evolution of the oil market. The U.S. threat to impose 25% tariffs on Venezuelan crude imports has added pressure on the trade flow to China, the main buyer of Venezuelan oil. At the same time, new sanctions on Iran could further tighten global supply, once again placing Saudi Arabia in a position to cover any supply shortfall.
Moreover, recent agreements between the U.S., Ukraine, and Russia to reduce attacks on energy infrastructure suggest an effort to partially stabilize the market; however, any breakdown in these negotiations could quickly reintroduce volatility in oil prices.
Overall, while economic risks from trade tensions persist, the current balance between strong U.S. demand and supply constraints due to geopolitical factors is creating a bullish environment for oil. The energy market continues to show clear signs of strengthening, suggesting that prices could remain firm in the short term, with close monitoring of any unexpected shifts in the global landscape.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
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Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.