Oil rebounds after API reports biggest crude draw this year

The American Petroleum Institute (API) reported a hefty draw of 5.789 million barrels in the United States.

Gasoline inventories rose by 3.169 million barrels, according to the API, against an expected draw of 700,000 barrels. Gasoline inventories continue to worry markets, as refiners.

So while the crude oil has experienced an overall drawdown over the last couple of weeks, it's simply being converted to gasoline, and extra inventories are moving from one side of the refinery to the other. Gasoline inventories have continued to build for four weeks in a row, if the EIA confirms this week's build tomorrow.

According to the EIA, gasoline inventories have climbed up to 5.1 million barrels.

And with that inventory situation-both in front of the refinery and behind it-oil prices are backsliding to pre-OPEC-agreement levels. OPEC's most recent round of spaghetti flinging has not been able to lift prices much-comments so far included hints at extending the production cuts into the second half of the year, hints that the cuts might go deeper in H2, and hints that production cuts Might extend into 2018.

Try as they might to wrench prices upward, oil prices fell again on Tuesday, exacerbated by the Energy Information Administration’s Short-Term Energy Outlook, which sees U.S. crude oil production averaging 9.3 million barrels per day in 2017, and almost 10.0 million bpd in 2018. WTI was trading down 1.21% on the day at 4:17pm EST at $45.87—dangerously close to the important $45 mark—and Brent Crude was trading down 1.32% at $48.69 on the day. Both benchmarks have fallen more than $2.00 since this time last week, as the market remains discontent over unmet expectations for inventory drawdowns.

Distillate inventories fell this week by 1.174 million barrels, and inventories at the Cushing, Oklahoma, site fell by 133,000 barrels. 

By 4:42pm EST, both WTI and Brent Crude had picked up slightly and were trading at $46.16 and $48.95 respectively.