Oil prices had a volatile day but ended higher after falling over 2% earlier in the day (as Chinese crude imports reportedly declined in April). The surge was driven by comments from US Energy Secretary Jennifer Granholm confirming that the administration may start buying back crude oil for the Strategic Petroleum Reserve late this year (despite having actually continued to draw it down this year).

“The price is right for the US to begin refilling their strategic oil reserve, providing a much needed bid for oil bulls as recessionary headwinds grow,” said Daniel Ghali, a commodity strategist at TD Securities.

However, none of this was new news but in a thin market it was enough to spark a bounce in WTI.

"Everyone knew the White House needed to refill the SPR sooner than later given reserves are at a four-decade low," Edward Moya, senior market analyst at OANDA, wrote in a market update, adding that the Biden administration was initially planning on filling up the reserve when prices were around the $70 region.

We will see if actual inventory data can shift sentiment.

API

• Crude +3.618mm (-800k exp) - biggest build since Feb
• Cushing
• Gasoline (-800k exp)
• Distillates (-400k exp)

Expectations were for a 4th straight week of crude draws but API reported a 3.618mm build - the largest since Feb...

(Click on image to enlarge)

Source: Bloomberg

WTI was hovering around $73.50 ahead of the API print and did not budge on the unexpected crude build.

(Click on image to enlarge)

The rebound (of last week's flash-crash) came after oil prices dropped by just over 7%, driven by worries over the economic outlook.

Still, considering that central bank officials appear "far more comfortable providing a narrative that there is hope recessions can be avoided, the widespread selling that commodities like oil suffered last week was very much over the top," said Jameel Ahmad, chief analyst at CompareBroker.io, in emailed commentary.

Tomorrow's CPI print (and official inventory/supply data) will likely be the catalyst for extending gains or reversion back to last week's lows.

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