Oil continues to be a game of two halves, with Brent reacting positively to the overnight American Petroleum Institute’s (API) crude inventory data, with WTI continuing to sag as Hurricane Harvey induced refinery shutdowns leaving U.S. crude with no home to call its own.
Lost in the winds of Harvey, the API reported another massive drawdown of 5.78 million barrels against an expected 1.75 million overnight. This continues the multi month trend of falling inventories and would normally be positive for crude as we look forward to the official inventory data this evening. However, with fully 20% of the U.S. refining capacity, off-line attention has been focused on potential shortages in refined products with gasoline futures rocketing another four percent higher overnight.
Brent spot is trading at 51.70, unchanged from its overnight and previous days close. The Brent premium has blown out to multi-year highs of $5.50 due to Hurricane Harvey and sellers of the Brent/WTI spread at these levels maybe capping Brent’s gains for now. Nevertheless, it continues to consolidate its gains trading mid-range with support at 51.00 and resistance at 53.70.
WTI spot fell 50 cents to close at 46.20 where it trades unchanged this morning, wilting under the flood waters. We expect this state of affairs to continue until we have more visibility timeframes for the Texas and Louisiana refineries to restart production, a process that could take more than a week during normal operations. The official crude Inventory data is expected at -1.75 million barrels with a more negative number most likely not having its usual positive effects on prices. A better than exected number in the present circumstance, however, may see WTI come under unwelcome pressure again.
WTI spot has support at 45.20 and 45.00 with resistance at 46.85 and 47.20.