WTI Outpaces Brent as U.S. Crude Draw Ignites Fresh Buying

Crude Oil Prices Surge as U.S. Inventory Draw Exceeds Expectations

WTI crude oil futures have climbed significantly this week, driven by a substantial decrease in U.S. crude inventories. The Energy Information Administration (EIA) reported that U.S. crude supplies fell by a more-than-expected 8.6 million barrels in the week ending October 9, compared to the anticipated 288,000-barrel draw. The inventory drop came while the market was already grappling with tanker attacks near the Strait of Hormuz, renewed assaults on Russian refineries, emergency stock releases, and discussions about oil moving from sanctioned vessels.

WTI crude oil futures, trading at $97.58 on Thursday at 2138 GMT, surged 6.46% for the week, reaching new highs. The contract has fluctuated between $89.61 and $98.32 throughout the week. Brent crude oil futures, on the other hand, remained near $106 a barrel. The EIA's inventory report played a pivotal role in positioning WTI ahead of the other benchmark.

Traders had underestimated the magnitude of the draw, which left the market unprepared for such a significant decrease in crude supplies. Distillate stocks decreased by 2.5 million barrels and were 12% below the five-year average, while gasoline inventories rose by 3.5 million barrels. Despite the increase in gasoline inventories, the WTI reaction remained focused on the inventory draw.

U.S. product demand has remained robust, with total products supplied averaging 21.1 million barrels per day over the past four weeks, marking a 2% increase from the previous year. Gasoline demand averaged 8.7 million barrels per day, while distillate demand averaged 4.0 million barrels per day, slightly lower than the previous year.

The U.S. report did not indicate a tightening of the barrel's various components but showed enough supply concerns to keep buyers engaged. The Strait of Hormuz remains the market's primary supply risk, with recent attacks on a container ship and a dry bulk carrier, and Iran's increased attacks in response to the U.S. blockade and sanctions.

The Saudi-Houthi conflict and Ukraine's renewed strikes on Russian refineries have also contributed to supply concerns. However, no direct interruption to crude production or major energy facilities has been reported recently. The market is still dealing with shipping attacks, expensive diesel, and higher freight costs, but no new direct threats to crude production or energy facilities have emerged.

Brent held the premium built into the market, while WTI gained fresh buying momentum after the inventory report. The IEA announced plans to accelerate the release of remaining volumes from the March collective action, including more than 20 million barrels of diesel. Although the IEA delivered less than initially pledged, it still added barrels to the market without changing the ongoing issues surrounding Hormuz or the pressure in diesel markets.

Discussions about easing restrictions on the global shadow fleet to allow legal oil to move on previously sanctioned vessels have also been considered. However, these potential supply increases have not been sufficient to dominate the trade. The weekly November WTI crude oil futures technical analysis indicates that the main trend is up, and a sustained move above the $96.02 to $94.28 range could lead to a possible retest of the contract high at $101.69, with potential upsides at $104.44 and $110.08.

Conversely, a move under $94.28 would signal slowing buying and increasing selling pressure, potentially changing the main trend to down.