WTI Extends Losses After Biggest Crude Build In 3 Years

Oil prices are sliding this morning following as an over-supplied market (API reported a huge 11.4mm barrel build last week) beats the geopolitical risk premia (with the US poised to attack Iran).

“Iran, rather than backing down and agreeing to all and any term [U.S. President Trump] is placing on the table (as he had expected), is instead daring him to attack.

“Just you try it and you will see what you will get!” is kind of what Iran implicitly said to Trump when it held military drills in the Straight of Hormuz last week,” Bjarne Schieldrop, chief commodities analyst at SEB Research, wrote.

But, prices dipped into negative territory after a Hezbollah official said the group will not intervene in the event of limited US strikes on Iran, AFP reported.

“My preference is to solve this problem through diplomacy, but one thing is certain: I will never allow the world’s number one sponsor of terror, which they are by far, to have a nuclear weapon,” Trump said on Tuesday.

Nevertheless, The US has ordered the biggest military build-up in the Middle East since the second Gulf war in 2003, including two aircraft carriers. America is adding even more assets to the region, deploying 12 stealth F-22 fighter jets to Israel, according to CNN, which cited a defense official.

“So long as we remain in this realm of uncertainty, oil prices are more prone to upside risk on any headlines out of the US-Iran talks,” said Samantha Hartke, head of market analysis for the Americas at Vortexa Ltd.

“Our view is that a prolonged disruption is unlikely given the onerous effect that will have on Iranian trade flows and revenues,” she added, referring to Hormuz.

So will the official data confirm API’s ugly over-supplied build signal?

API

• Crude +11.4mm

• Cushing +1.8mm

• Gasoline -1.5mm

• Distillates -2.8mm

DOE

• Crude +15.99mm – biggest build since Feb 2023

• Cushing +881k

• Gasoline -1.01mm

• Distillates +252k

The official data confirmed a huge inventory build for crude stocks in the US (15.99mm barrels is the biggest build since early Feb 2023), reverses some of the bumper draws we’ve seen in the last few weeks. The rest of the energy complex was ‘meh’…

Source: Bloomberg

Don’t get too excited though as a huge jump in the adjustment factor is a sign that this data is likely still being impacted by the bad weather of recent weeks…

Source: Bloomberg

Crude production dipped last week…

Source: Bloomberg

WTI slid before the DOE data but is holding in the red for now after the huge crude build…

Source: Bloomberg

Despite the sizable builds, Bloomberg notes that this week has brought fresh evidence of how the tide is turning in favor of those who believe crude can surprise to the upside.

On Monday, shale giant Diamondback Energy said the widely anticipated “wave of oversupply” is being deferred further out in time, a view echoed the following day by Baker Hughes.

Meanwhile, Goldman Sachs raised its forecasts for Brent crude prices, saying that while supply is still expected to exceed demand this year, the excess will continue to be diverted to less-visible storage hubs.

Additionally, OPEC+ delegates firmed up expectations that key members will agree to resume modest supply increases in April when they meet this weekend.

While that decision may end up adding more barrels onto an already-oversupplied world market, it’s also a sign of the undimmed confidence among top Middle East producers that the universally bearish view is overdone, and that extra barrels can ultimately find a home.

The prospect of conflict in Iran could tighten supplies further. Iran counts for about 3% of global oil supply, producing roughly 3.3 million barrels per day.