U.S. Crude Stocks Surprisingly Fall Despite Forecast Increase, Oil Prices Edge Higher

U.S. crude oil inventories surprisingly fell by 3.237 million barrels last week, according to data released by the American Petroleum Institute (API) on Tuesday. This unexpected drawdown contrasted with analysts' expectations of an 800,000-barrel increase in crude stocks for the week ending April 19, 2024.

The surprising decline in U.S. crude inventories has contributed to a slight uptick in oil prices, which were already edging higher amid ongoing tensions in the Middle East. West Texas Intermediate (WTI) crude oil futures briefly dipped below $81 per barrel earlier on Tuesday but later rebounded, closing in on the day's highs at $83.46 per barrel.

Market analysts attribute the price resilience to several factors, including growing risk appetite, a weakening U.S. dollar following softer U.S. Services and Manufacturing PMI data, and the possibility of additional sanctions against Iran. Speculation of a potential 4 million barrel per day draw in crude oil has also fueled market enthusiasm late in the day.

Why this matters: The unexpected drop in U.S. crude inventories, despite forecasts of an increase, highlights the volatility and unpredictability of the global oil market. The ongoing tensions in the Middle East and the potential for further sanctions against Iran underscore the geopolitical factors that can significantly impact oil prices and supply.

The official data from the U.S. Energy Information Administration (EIA) is set to be released later today, providing further insight into the country's crude oil inventory levels. Market participants are also closely monitoring the release of U.S. GDP data for the first quarter of 2024, as it will likely influence the Federal Reserve's upcoming interest rate decision.

Weaker-than-expected purchasing managers index data for April in the U.S. has raised hopes among some investors of a potential interest rate cut by the Federal Reserve. The API report also noted that U.S. crude oil inventories in the Strategic Petroleum Reserve (SPR) rose by 0.8 million barrels as of April 19, reaching 365.7 million barrels, the highest level since April 2023.

Key Takeaways

• U.S. crude oil inventories surprisingly fell by 3.237 million barrels last week.
• The unexpected drawdown contrasted with analysts' expectations of an 800,000-barrel increase.
• The decline contributed to a slight uptick in oil prices, with WTI crude closing at $83.46/barrel.
• The official EIA data and U.S. GDP data for Q1 2024 will likely influence the Fed's rate decision.
• U.S. crude oil inventories in the SPR rose to 365.7 million barrels, the highest since April 2023.