Oil: Inventory draws and risk premiums support prices – ING

ING strategists Ewa Manthey and Warren Patterson note that Oil prices have risen for a fourth straight session, supported by US-Iran tensions and concerns over shipping through the Strait of Hormuz. A slightly bullish US inventory backdrop, record-high diesel crack spreads and global refining constraints are also tightening the market and underpinning Oil prices in the short term.

Geopolitics and inventories underpin crude

"Oil prices extended gains for a fourth consecutive session on Wednesday as uncertainty over a resolution to the US-Iran conflict continued to support risk premiums. US President Donald Trump reiterated that no talks were underway with Tehran and signalled that additional sanctions could be announced this week."

"Reports of reduced vessel traffic through the Strait of Hormuz have also raised concerns over potential oil supply disruptions."

"The oil market also drew support from a slightly bullish API inventory report. US crude inventories fell by 328k barrels last week, compared with market expectations for a 74k-barrel draw. Stocks at the WTI delivery hub in Cushing declined by 1.4m barrels. "

"Product inventories were mixed, with gasoline stocks rising by 1.1m barrels while distillate inventories fell by 2.8m barrels. The more closely watched EIA inventory report is due later today."

"US diesel crack spreads climbed above $100/bbl yesterday, reaching a record high as global refining constraints and supply disruptions tightened the market. Diesel cracks have more than doubled since the start of the US-Iran conflict and are up more than 20% month-to-date."

"Export restrictions from Russia, following repeated Ukrainian drone attacks on refineries, have reduced diesel availability, while disruptions affecting energy infrastructure elsewhere have added to concerns over supply and helped support prices."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)