Oil price news: oil advances as U.S. stockpile decline signals tighter market

Jordan Fitzgerald, Yongchang Chin and Alex Longley, Bloomberg News

Oil pump jacks in Midland, Texas, US, on Thursday, March 2, 2023. Thousands of miles away from the turmoil on Wall Street, Midland, Texas that ranked No.1 in the US for inflation just over a year ago has since ceded that title – only to lay claim to a different one: the country’s pay-raise capital. Photographer: Sergio Flores/Bloomberg , Bloomberg

Oil climbed after government data showed a decline in U.S. stockpiles, signaling a tighter physical market.

West Texas Intermediate settled near US$79 a barrel as crude oil inventories fell by 1.36 million barrels, according to the Energy Information Administration. The pop shows that traders are taking the news as the first bullish indicator among a sea of bearish technicals.

Earlier in the session, WTI sunk to its lowest level since mid-March. Oil has been on a downtrend since early April, posting losses in three of the past four weeks, with weakness not just in timespreads but in processing margins too. That decline has come as much of the geopolitical premium from tensions in the Middle East has unwound, bringing traders’ focus back to a cooling market.

An American Petroleum Institute estimate on Tuesday had predicted U.S. stockpile gains, according to people familiar with the matter.

“The EIA’s more reliable crude oil storage numbers countered the API’s steep build, which is tripping some shorts into covering positions that were sold in late yesterday’s and this mornings trade,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities.

A stronger dollar is an added headwind as the commodity becomes more expensive for many investors. The U.S. currency headed for a third day of gains, according to a Bloomberg gauge, while oil’s breach below its 100-day moving average is also exacerbating the latest bout of price weakness.

The Organization of the Petroleum Exporting Countries is due to meet next month to assess supply policy after implementing production cuts over the first half of the year to support prices. Most traders expect that the curbs will be extended, possibly to the year-end, according to a Bloomberg survey.

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