WTI jumps back to $65.00 level following bullish API inventory numbers

• WTI saw a late recovery, jumping to just under $65.00 following bullish API inventory numbers.
• Crude oil markets were still lower on the day, however, dragged down by vaccine rollout concerns in Europe.

Tuesday marked a third consecutive day of selling for crude oil markets; front-month futures contracts for West Texas Intermediary (WTI) at one point dropped under $64.00, but by the end of US trade had recovered back to just under the $65.00 level, down a modest (by crude oil’s standards) 0.7% or 40 cents on the day.

A decent amount of this recovery was driven by bullish weekly Private API crude oil inventory numbers; according to API, headline crude oil stocks dropped by 1M barrels last week, versus consensus expectations for a 2.715M barrel build in stocks. The data helped WTI rally from the $64.60s to just under $65.00 prior to the close of futures trade.

Note; futures markets will reopen at 22:00GMT after the usual daily 1-hour closure – the time change in the US has moved the timing of this closure forward by one hour. When UK clocks change to BST, the futures market closure will again be between 22:00-23:00.

Driving the day

So bullish API inventories didn’t quite manage to save the day but certainly helped crude oil markets erase some earlier losses. Trade is likely to subdued during Wednesday’s Asia Pacific session ahead of what is going to be a very important US session on Wednesday; official US EIA crude oil inventory numbers for last week will be released at 14:30GMT (one hour earlier than usual due to the US clock change), the FOMC will release the results of their latest monetary policy decision and updated economic projections at 18:00GMT and then Fed Chair Jerome Powell will by speak at the post-meeting press conference at 18:30GMT (also one hour earlier than usual due to the clock change in the US).

In terms of why crude oil markets were on the back foot on Monday; market commentators cited vaccine rollout disruption in the Eurozone as the major factor – major European countries including France, Germany, Italy and Spain all halted the rollout of AstraZeneca’s vaccine amid fears it may be linked to blood-clots. Data from the UK (who have vaccinated over 10M with the AstraZeneca vaccine already) suggests that is not the case – the decision by European health authorities to halt the rollout of the vaccine will increase vaccine hesitancy on the continent and further push back the bloc’s timeline towards herd-immunity, pushing back its economic recovery. This is, of course, not good news for crude oil markets.

But taking a broader look at crude oil prices; they are still pretty close to recent highs and recent selling appears to be nothing more than consolidation ahead of what might well be a further leg to the upside. More specifically, WTI responded well to support in the $63.00-$64.00 area (the end of February highs and 10 March lows) and it seems likely that WTI will remain within a $64.00-$66.00ish range.

If markets do adopt a more risk-off tone, WTI is likely to break below $63.00 and challenge its 21-day moving average at $62.80. Conversely, if the bulls do regain control, a move back towards March highs just under $68.00 seem likely.