Oil: Rally extends on sanctions risk – ING

ING strategists Ewa Manthey and Warren Patterson note Oil has extended its rally for a fifth straight session, with ICE Brent above $92 and WTI over $86 as markets react to tighter US sanctions on Iran. They highlight a surprise build in US commercial crude inventories to the highest level since May, driven by higher domestic supply despite strong exports and lower imports.

Crude rally meets inventory build

"Oil extended its rally for a fifth consecutive day after US President Donald Trump announced measures to intensify economic pressure on Iran. ICE Brent climbed above $92/bbl, while NYMEX WTI traded above $86/bbl on Thursday morning, supported by concerns over tighter sanctions enforcement. Trump also warned of tougher economic penalties for entities supporting Iranian economic activities, signalling a further escalation in US efforts to isolate Iran."

"The EIA's latest weekly inventory report showed US commercial crude oil inventories increased by 4.4m barrels to 428.8m barrels, marking a third consecutive weekly build and the highest level since May. This contrasted sharply with API's reported 328k barrel draw and market expectations for a 74k barrel decline. Meanwhile, the Strategic Petroleum Reserve fell by 5.3m barrels, leaving total US crude oil inventories down by a modest 0.9m barrels."

"The commercial stock build was driven by higher domestic supply despite strong export demand and lower imports. Crude exports rose by 1.01m b/d week-on-week to 4.07m b/d, while imports fell by 746k b/d to 6.59m b/d. Refinery activity remained robust, with crude throughput increasing by 216k b/d and utilisation rates rising to 97.2%, close to seasonal highs."

"Strong refining margins continue to incentivise refiners to maximise run rates."

"Refined product inventories showed a mixed picture. Gasoline stocks increased by 0.69m barrels to 209.4m barrels, while distillate inventories fell by 1.5m barrels to 105.6m barrels. The decline in distillate stocks was driven by lower imports and reduced domestic production, tightening supply in the US market."