Lower In Asia On Growth Worry; WTI Eyes $100

WTI and Brent are $3.00 worse off apiece, operating a short distance above their respective multi-week lows made on Wednesday. Both benchmarks appear on track for a second straight day of losses, with debate re: recessionary risks continuing to do the rounds.

• Crude seemingly came under pressure in Asia from spillover owing to the release of the latest round of U.S. API inventory data late on Wednesday, with reports pointing to a relatively large, surprise build in crude inventories (reported to be largest since mid-Feb ‘22), and a surprise increase in gasoline stockpiles as well. On the other hand, a drawdown was seen in distillate and Cushing hub stocks.
• Elsewhere, worry re: a Fed-led recession continues to see crude operate around its lowest levels for the month, with remarks from Fed Chair Powell that a soft landing for the U.S. economy would be “very challenging” taking focus.
• Turning to the U.S., the gasoline tax holiday proposed by U.S. President Biden continues to draw discussion (keeping in mind that recent news re: the proposed measure has coincided with recent weakness in crude), with some pointing out that the corresponding support for gasoline demand would likely exacerbate tightness in gasoline and crude supplies.
• Looking to OPEC, supply worry remains elevated, with the International Energy Agency (IEA) earlier this week pointing out that Nigeria (largest producer in Africa) and Angola (third largest) are unlikely to meet their OPEC output quotas in ‘22. S&P Global estimates have put Nigerian crude production in May at >30 year lows, while Angolan output has fallen from 1.8mn bpd in 2017, to ~1.2mn bpd.
• Up next, an expected release of U.S. crude inventory data later by the EIA will be delayed until at least next week, owing to “systems” issues faced by the agency. Elsewhere, Energy Secretary Granholm is due to meet U.S. oil executives later on Thursday.