WTI choppy within $58.00-$60.00 intra-day range in wake of bearish EIA inventory report

• WTI has been choppy, dropping to $58.00 from session highs at $60.00, before rebounding sharply to $59.00.
• A bearish weekly EIA inventory report does not seem to have had a lasting impact on crude oil markets.

Front-month WTI futures have been choppy in recent trade, dropping all the way to just above the $58.00 handle from earlier session highs at $60.00, before rebounding sharply to the $59.00 level. At present, with WTI trading just to the north of $59.00, the American benchmark for sweet light crude oil is trading with modest losses on about 30 cents or 0.5%. WTI continues to trade well within the low-$57.00 to $62.00ish range of the last few weeks.

Driving the day

A bearish weekly EIA crude oil inventory report does not seem to have had a lasting impact on crude oil markets this Wednesday. The report largely confirmed what Tuesday’s API report had suggested, which probably explains the lack of any immediate market reaction; crude oil stocks saw a larger than expected draw of slightly more than 3.5M barrels, but distillate and gasoline stocks both saw much larger than expected builds of 1.452M and 4.044M barrels respectively. Meanwhile, weekly refinery utilisation rates saw a smaller than expected increase of 0.1% WoW versus forecasts for an increase of 1.1%.

In terms of other fundamental catalysts for crude oil markets, there is not too much to update on. Crude oil market participants continue to fret over the worsening state of the Covid-19 pandemic in key global markets such as Brazil (which just posted a record daily death toll of above 4K), India (which is experiencing sharp acceleration in new confirmed infections of now more than 100K per day) and in Asia (Japan’s Osaka prefecture reported a new record number of daily infections of above 800, while new cases in South Korea were at a three-month high at 668). Meanwhile, Europe remains in lockdown indefinitely as it struggles to contain its own third wave of infections. Desks have noted that as long as the global Covid-19 news remains negative, crude oil markets are going to struggle to recover back towards March highs in the upper-$60s.

In terms of supply-side dynamics to take note of; the first step towards the US and Iran returning to the JCPOA nuclear agreement, which would see restrictions on Iranian crude oil exports removed, appear to be in motion with officials from the two sides having engaged in indirect talks in Vienna on Tuesday and set to speak again on Friday. Most desks do not expect a deal to be reached quickly, but some are concerned that an increase in Iranian supply could put downwards pressure on crude prices in the coming months. Some have suggested that the rest of OPEC+ is likely to make up for this increase in Iranian output by paring back its own productions, however, which would minimise the impact on the market.