More Crude Stockpile Builds Diffuse Resurgent Hopes For Bull Market Momentum

Analysts are divided on whether oil is overbought or headed for strong growth: File Image/Pixabay

Oil prices on Wednesday reversed course despite analytical musings that the commodity was leaving its range-bound status, the culprit being yet another unexpected build in U.S. inventories that eclipsed support provided by geopolitical tensions.

Brent slid 6 cents to $85.27 per barrel by 1943 GMT, while West Texas Intermediate dipped 10 cents at $81.47 per barrel.

U.S. crude stocks rose by 2.2 million barrels in the week ended June 14 according to the American Petroleum Institute; expectations had been for a 2.2 million barrel draw; however, gasoline inventories fell by 1.077 million barrels.

This was apparently enough to impact the support earlier generated by Israeli foreign minister Israel Katz warning of an impending decision on an all-out war with Hezbollah despite the U.S. trying to avert such a confrontation.

It also diffused the support provided by a drone strike from Ukraine causing a large fire in a fuel tank at an oil terminal in Russia's southern port of Azov.

Tamas Varga, analyst at PVM, said, "The current snapshot presents an underwhelming picture but there are green shoots that indicate a more optimistic outlook," and he added that Brent's recent resurgence "shows genuine optimism that the global oil balance will eventually tighten."

Bloomberg noted that "Key timespreads have ballooned, indicating stronger near-term demand, while refiners in Asia are restoring some capacity following maintenance despite weak margins, boosting crude consumption."

However, the news agency warned of signs of futures being overbought: "Brent's relative strength index on a nine-day basis has exceeded 70, indicating that a pullback may be on the horizon."

But despite the usual mixed messages from data, Standard Chartered contributed to the overall positive market sentiment apart from Wednesday's muted trading: it put actual April oil demand at 101.77 million barrels per day (bpd), or 470,000 bpd higher than its previous forecast.

Standard Chartered wrote, "Given the strong improvement from March, we think the April numbers represent an important break from the highly bearish demand narrative and associated weak sentiment that has dominated oil markets over the past couple of months."