Image Source: Unsplash
 

Oil prices are higher this morning after the API's report showed crude inventories fell last week, while negotiations to end Russia's war on Ukraine failed to reach an agreement.

Prices have been stuck in a narrow range in recent weeks as geopolitical concerns have countered rising supply as OPEC+ returned 2.6 million barrels of production cuts to the market amid increasing production outside of the cartel.

But a lack of progress in U.S.-led negotiations to reach a peace deal between Ukraine and Russia and the Trump Administration's military build-up off Venezuela continue to command a risk premium for the commodity.

"Traders weighed prospects for an end to the war in Ukraine while watching for Trump's next moves on Venezuela. Ahead of today's EIA report, the API said US crude stockpiles rose by 2.5 million barrels last week. Overall, Brent and WTI remain confined to tight ranges as ample global supply continues to offset geopolitical risk," Saxo Bank noted.

Will the official data confirm API's

API

• Crude -2.48mm

• Cushing -89k

• Gasoline +3.1mm

• Distillates +2.88mm

DOE

• Crude +574k

• Cushing -457k

• Gasoline +4.518mm - biggest build since May

• Distillates +2.059mm

The official report was delayed but once it hit, it showed a small crude build (as opposed to API's reported draw). Products saw big builds (Gasoline largest weekly add since May) and Cushing stocks fell for the 4th straight week...
 

Source: Bloomberg
 

Cushing's ongoing draws leave stocks near 'tank bottoms' once again...
 

Source: Bloomberg
 

US Crude production hovers near record highs despite the rapid decline in rig counts...
 

Source: Bloomberg
 

WTI is holding gains after the delayed data...
 

Source: Bloomberg
 

Geopolitical tensions are keeping the market jittery and adding a risk premium to prices, partly countering concerns about a surplus. That includes US rhetoric against Venezuela, with President Donald Trump suggesting the Pentagon will soon start targeting drug cartels with strikes on land.

Senate hawks calling for a complete Venezuelan overthrow further fuel oil’s upside risk. Eschewing the term “regime change”, Rick Scott (R–Fla.) told ZeroHedge that he’d like to Venezuelan President Maduro in handcuffs.

”I’d like [Maduro] to be arrested for selling drugs into this country,” Scott said today. “That’s not ‘regime change’. He is not the president of Venezuela… there was an election. He lost the election.”

On the Russian front, Goldman sees little change in markets following the peace talks.

“The Brent crude price remained roughly unchanged in the low $60s over the last week as Russia-Ukraine peace talks continue,” Goldman Sachs Group Inc. analysts including Yulia Grigsby said.

“Oil markets and prediction markets do not appear to price a large probability of a near-term peace agreement and removal of the sanctions on Russia oil.”

Grigsby also noted that overall levels of Russian oil exports have remained robust, even after US penalties on Lukoil and Rosneft, as sales rapidly pivoted to non-sanctioned producers.

On the bright side, the broadly weaker trend on crude oil prices has dragged gas (pump) prices down to their lowest since May 2021...
 

Source: Bloomberg
 

While it's not exactly 'drill, baby, drill', it's certainly what Trump wanted (the question is, will the lower price push shale producers to cut production... and round and round we go).

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