Tuesday and Wednesday, we had API and EIA weekly reports, respectively, showing an increase in American fuel inventories. For the week ended June 3, API and EIA respectively reported a 1.845 and 2.025 Million barrels increase in the inventory levels; both were more than market estimates.
The report also shows that refined oil inventories recorded an increase of 2.592 million barrels, much higher than market expectations of an increase of 1.060 million barrels, after the last week's decrease of 529,000 barrels.
However, Oklahoma Cushing crude oil inventories fell sharply by 1.593 million barrels; heating oil inventories decreased by 508,000 barrels, and gasoline inventories decreased by 812,000 barrels. Nevertheless, the most importantly, inventories in the Strategic Petroleum Reserve (SPR) fell for the 39th consecutive week, falling by 7.269 million barrels, which was the largest since Aug. 20, 1982.
Producers will face difficulty in fulfilling demands, even if they want
Even though it seems premature to say that oil market demand has peaked or is approaching, we can say it is increasing, especially after that China ended its lockdowns. Tuesday, the UAE's energy minister emphasized that demand is increasing.
In contrast, production can not increase at the same pace, as lower investment caused by the COVID-19 crisis in this industry has caused a lack of production facilities. According to a report on the Geopolitical Intelligence Service (GIS) blog, the market consensus is that global oil consumption will peak within the next 20 years, but demand will not necessarily decline sharply.
On top of that, a suspicious explosion occurred at the Freeport LNG facility in Texas. The free port accounts for 16% of total US LNG export capacity, and this explosion meant fewer LNG exports. Even if domestic supply with less export can increase and decrease the prices in the US, it will increase the Gas price in Eurozone.
This can be the bad luck of Europeans, while they are suffering from Gas supply from Russia.
From the technical point of view, both WTI and Natural Gas are in a clear uptrend, and for now, we do not have any acceptable reason to say this uptrend can stay somewhere or even reverse.