WTI Holds Losses As SPR Drain Slows, Cushing Just Off 'Tank Bottoms'

Oil extended its biggest quarterly drop since the pandemic this morning as traders monitored US-Iran peace talks and a market for real-world barrels that’s been in freefall.

WTI is holding below $70 as US negotiators Jared Kushner and Steve Witkoff had positive discussions in Qatar and technical talks with Iran are moving ahead, a senior administration official said, while President Trump said the meeting was good.

Crude has fallen in recent days as the warring parties continued discussions to reach a more lasting accord, although recent attacks around Hormuz have marred negotiations. Oil tanker traffic is now showing signs of recovery, and has picked up since the US and Iran exchanged strikes over the weekend, though vessel flows remain below pre-war levels.

“We expect that by the end of July this is done,” said Samantha Dart, co-head of global commodities research at Goldman Sachs, referring to the conflict.

“Once we have a normalization of flows through the strait, the expectation is that we go into an oversupply.”

API reported another sizable crude drawdown...

API

• Crude -6.1mm

• Cushing +500k

• Gasoline -2.1mm

• Distillates +2.9mm

DOE

• Crude -3.775mm

• Cushing +709k - first build in 10 weeks

• Gasoline -2.33mm

• Distillates +2.48mm

The official DOE data shows the 10th straight week of crude drawdowns, but stocks at Cushing rose (for the first time in 10 weeks). Products were mixed...

Source: Bloomberg

...BUT... Cushing stocks remain at 'tank bottoms'...

On the Gulf Coast, gasoline stocks are down to their lowest since October 2024 -- and the lowest for this time of year since 2015.

Nationally, they remain at the lowest for this time of year since 2014...

The SPR saw another drawdown last week, but it was notably smaller than recent declines...

A total of 89 million barrels of crude has been taken out of the SPR since late March under a program to release 172 million barrels as part of a relief plan coordinated by the International Energy Agency aimed at lowering energy costs.

The US still plans to release all those barrels.

US crude production remains near record highs as rig counts are rising rapidly...

Crude imports from the Middle East fell in the week to June 26.

Inflows from Iraq fell to zero, while 56,000 barrels a day of Saudi crude were offloaded. Customs data show that crude came from storage tanks in tanks in the Bahamas.

WTI was hovering around $69 ahead of the official print and dipped on the data...

In the meantime, Bloomberg reports that physical markets are looking weak.

Brent’s nearest timespread remained in contango (red oval in chart below) - a sign of oversupply - after expiry of the August contract.

Barrels from West Africa to the North Sea were offered at multiyear lows on Tuesday, as the rise in supply from Hormuz outpaces refinery demand. Saudi Arabia is making rare spot sales of oil as the kingdom’s shipments ramp up.

Finally, what Mr Trump really cares about - gas prices - are coming down...

...and look set to fall considerably further.

BUT... crack spreads are blowing out even as crude prices fall...

...signaling strong (and strengthening) demand for refined products (like gasoline or diesel) relative to crude supply (and potentially low inventories of refined products)... which could well keep pump prices more elevated than crude would suggest (and Trump would like).