WTI oil lost 4.8% overnight after crude oil inventories dropped by 2.2 million barrels, which was far less than the 6.7 million barrel decline seen in the API crude oil inventories number the day before. But the real focus in the market is the lack of decline seen in gasoline inventories. Summer driving season in the US will end within the next two months, which is when demand for gasoline is at its highest, and yet gasoline inventories are not declining as expected. This is developing into a major concern for the oil market because once the seasonal demand disappears, gasoline inventories could be set to explode in the second half of the year. All of the major US refiners look set to continue to see further falls after what was already a nasty session overnight: Valero (VLO), PBF Energy Inc. (PBF), Phillips 66 (PSX), HollyFrontier Corp (HFC). In year-on-year terms, gasoline inventories have actually begun to rise again – the last thing the oil market wants to see.
WTI oil dropped to its lowest level in roughly two months overnight with many longs possibly capitulating their positions around recent technical support at the US$46 level. For the moment oil is holding above the US$45 level, but technically there is not much support to hold it above the US$43 level and further declines could be in the offing.