Commodity Market: US Crude Oil extends gains as sharper-than-expected inventory drop supports outlook for strong demand

Futures on US West Texas Intermediate Crude Oil extended gains on Thursday following a sharper-than-anticipated drop in US crude oil and gasoline stockpiles, which reinforced outlook for strong fuel demand.

Additionally supporting prices was the uncertainty surrounding the 2015 Iran nuclear deal, which could lift US sanctions on Iran’s crude exports.

An official report by the US Energy Information Administration showed on Wednesday that crude oil inventories, excluding the Strategic Petroleum Reserve (SPR), had decreased by 7.614 million barrels to 459.1 million barrels during the week ended on June 18th, or at a much sharper rate compared to what analysts on average had anticipated – a drop by 3.942 million barrels. It has been the most considerable inventory drop since the last week of April.

Meanwhile, US gasoline inventories decreased by 2.930 million barrels last week, which confounded a consensus of analyst estimates, pointing to an increase by 0.833 million barrels.

“The data was encouraging since not only crude stocks, but also gasoline inventory dropped, suggesting healthy demand and tight supply,” Tetsu Emori, Chief Executive of Emori Fund Management Inc, was quoted as saying by Reuters.

“Unless OPEC+ decides next week to increase output more than expected for August and later, oil prices are expected to stay at the current high range for a while,” he added.

Year-to-date, Brent Futures have risen over 45%, supported by OPEC+-led supply cuts and oil demand recovery, after coronavirus-related lockdown restrictions have been eased.

“Behind the Thursday’s rally is also a view that there are still gaps in the talks over the 2015 Iran nuclear deal,” Hiroyuki Kikukawa, general manager of research at Nissan Securities, said.

“We may see a short-term correction ahead of the OPEC+ meeting, but the market trend will remain bullish due to tightening supply-demand balance,” Kikukawa added.

OPEC+ members are scheduled to meet on July 1st.

As of 8:20 GMT on Thursday WTI Crude Oil Futures were edging up 0.48% to trade at $73.43 per barrel. Yesterday the commodity rose as high as $74.25 per barrel, which has been its strongest price level since October 10th 2018 ($75.08 per barrel). WTI Crude Oil Futures have risen 10.75% so far in June, following another 4.31% surge in May.

At the same time, Brent Oil Futures were edging up 0.29% on the day to trade at $75.62 per barrel. Yesterday Brent Futures rose as high as $76.00 per barrel, which has been the commodity’s strongest price level since October 31st 2018 ($77.10 per barrel). Brent Oil Futures have risen 8.90% so far in June, following another 4.20% surge in May.

Daily Pivot Levels (traditional method of calculation) – WTI Crude Oil Futures

Central Pivot – $73.38
R1 – $73.95
R2 – $74.81
R3 – $75.38
R4 – $75.94

S1 – $72.52
S2 – $71.95
S3 – $71.09
S4 – $70.22

Daily Pivot Levels (traditional method of calculation) – Brent Oil Futures

Central Pivot – $75.37
R1 – $76.03
R2 – $76.66
R3 – $77.32
R4 – $77.98

S1 – $74.74
S2 – $74.08
S3 – $73.45
S4 – $72.82