Northbound On U.S. Inventory Data, OPEC+ Underperformance; Shanghai Lockdown Eyed (Again)

WTI and Brent are $0.40 firmer apiece, operating ~$1 off of Wednesday’s best levels at typing.

• China announced a fresh lockdown and mass testing to begin on Saturday for Shanghai’s Minhang district (~2.7mn pop), with another district (Songjiang, ~1.9mn pop) due to hold mass testing over the weekend as well.
• Sentiment in major crude benchmarks softened a little in Asia-Pac dealing on the news, with WTI and Brent turning away from session highs, but continuing to operate comfortably within the upper-end of Wednesday’s range at typing. Losses in crude have likely been limited as fresh cases reported for Shanghai remain low (with no cases found outside quarantine on Wednesday).
• To recap Wednesday’s price action, WTI made fresh 13-week highs at $123.18, while Brent rose to its own one-week highs at $124.40, with the overall upward move facilitated by U.S. EIA oil inventories pointing to tightness in crude and gasoline supplies.
• To elaborate, EIA inventory data crossed on Wednesday (1530 BST), pointing to a surprise build in crude stockpiles - corroborating with reports of API estimates on Tuesday. There was a surprise drawdown in gasoline stockpiles as well, with inventories declining for a 10th straight week, exacerbating worry from some quarters re: tightness in refined fuel supply in the U.S., even as the EIA forecasts Q3 refinery utilisation rates at ~94%. Apart from that, there was a stronger than expected build in distillate inventories, while Cushing Hub stocks declined.
• Turning to OPEC, UAE energy minister Suhail al-Mazrouei flagged on Wednesday that OPEC+ continues to lag output production quotas, and currently pumps ~2.6mn bpd below stated targets, further suggesting that the return of Chinese oil demand (as the country lifts COVID lockdowns) even as spare output capacity within the group declines, would increase risks to crude markets.