Crude oil prices were once again on the decline today in Asian morning trade, extending a slip that began yesterday after the American Petroleum Institute surprised markets by estimating an inventory build in both crude and gasoline.
The API reported a 3.62-million-barrel increase in crude oil inventories, with gasoline stocks up by some 400,000 barrels.
Because the market had expected a draw, the estimates pressured oil prices already on shaky grounds as traders wait for the release of the consumer price index reading for April, due out later today.
If inflation remains stubbornly high, it would mean more rate hikes and more rate hikes would mean pressure on global oil demand as they would push the U.S. dollar higher making oil more expensive for other currency markets.
At the same time, prices got some support from the latest federal government update on plans to refill the strategic petroleum reserve after a historic draw of some 200 million barrels last year.
In this update, Energy Secretary Jennifer Granholm said the department could start buying oil for the SPR later this year. This was effectively a reiteration of previous statements that were not followed by actions of any kind but they also propped up prices for a while—in this case reversing a price decline in early Tuesday to a gain by the end of trade.
“It appears as though the US administration is still keen to refill the SPR later this year once maintenance at storage sites is complete,” Warren Patterson, head of commodities strategy at ING Groep, told Bloomberg. “Obviously, this will also be price-dependent.”
Right now, West Texas Intermediate is a bit above the higher end of the range the DoE gave for its target price for the refill: between $67 and $72 per barrel. At the time of writing, WTI was trading at a little over $73 per barrel.
There is still some support for oil prices from Canada, where wildfires forced the shut-in of over 300,000 bpd in production. The situation is normalizing thanks to cooler weather and production would likely resume soon.