Oil Steady With Report Pointing to Falling U.S. Crude Stockpiles

(Bloomberg) -- Oil was steady in Asian trading after an industry report pointed to shrinking U.S. crude and gasoline stockpiles as the market took a breather following a sustained slide that dragged prices below $65 a barrel.

Futures in New York fluctuated after losing 1.9% over the past three days. The American Petroleum Institute reported crude inventories dropped by 1.05 million barrels last week, according to people familiar with the figures. If confirmed by government data on Wednesday, it would be the first draw since mid-February and snap a run of large gains following the U.S. cold blast.

Investors will be watching for signs of demand recovery and higher liquidity with a monthly International Energy Agency report and Federal Reserve policy statement due Wednesday. The market will also get a snapshot on the health of U.S.-China relations following high level talks at the end of the week.

Despite the recent retreat, oil is still up almost 34% this year as output cuts from OPEC+ members tightens supply and as the demand outlook improves with the rollout of Covid-19 vaccines. Consumption is roaring back in some regions including the U.S., although parts of Europe are struggling to rebound.

“After the run oil has had so far this year, it’s unsurprising to see profit taking on upticks,” said Stephen Innes, chief global market strategist at Axi. “Still, the much improving economic outlook amid OPEC’s determination to have inventories draw is far from over.”

See also: Traders Snap Up Europe’s Gasoline After U.S. Stockpiles Collapse

The prompt timespread for WTI flipped into contango last week and was 4 cents a barrel in the bearish market structure on Wednesday -- where near-dated prices are cheaper than later-dated ones. U.S. producers have bounced back after the cold blast last month, although some refiners are yet to fully resume normal operations, leading to excess crude supplies.

U.S. gasoline inventories dropped by 926,000 barrels last week, while distillate stockpiles -- a category that includes diesel -- rose by 904,000 barrels, the API reported Tuesday. Supplies at the storage hub of Cushing declined.

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