U.S. crude stockpiles jumped last week, mostly due to strategic oil reserves moving to commercial inventories. At the same time, most inventories of refined products fell, prompting a spike in so-called crack spreads — the rough profit from turning crude into fuel.
The oil market has seen a tumultuous period of trading since Russia invaded Ukraine in late February. The reserve release by the U.S. and its allies, along with a Covid-19 resurgence in China, has weighed on prices in the last few weeks. There are some signs of easing virus restrictions and China’s central bank is expected to take measures to help bolster a faltering economy.
“Government energy intervention, the perceived self-shunning of Russian crude and the erratic buying patterns in recent weeks have all altered the near-term path,” RBC Capital Markets analysts including Mike Tran said. Trading looks “volatile and sloppy over the near term as the market digests the onslaught of 240 million barrels of crude unleashed from strategic reserves.”
To be sure, the oil market is still in the grips of a liquidity crunch sparked by surging volatility after a spike toward $140. Open interest in WTI futures fell to the lowest since 2016 on Wednesday, while traders are using options strategies as a way of effectively raising cash in the face of limited sources of capital.
Elsewhere, Kazakhstan expects its main oil-export route via Russia to restore full operations in late April, the country’s Energy Minister said. The nation said it remains concerned about the possible impact of Western sanctions or shipping issues on the flow of crude.