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The expected increase adds supply-side pressure at a time when demand signals remain weak. Analysts warn that unless demand rebounds quickly, the additional barrels could further saturate global markets. RBC’s Helima Croft indicated that Saudi Arabia appears ready to lead the supply expansion regardless of price stability concerns.
U.S. Crude Inventory Build Undermines Demand Optimism
The Energy Information Administration (EIA) reported a surprise 1.3 million barrel build in U.S. crude inventories last week, defying market expectations for a draw of similar magnitude. Stockpiles now stand at 443.2 million barrels, their highest in weeks. This came despite increased exports, with the build attributed to a sharp rise in imports and weak gasoline and distillate demand.
The bearish tone was reinforced by a surge in domestic storage demand, now approaching levels last seen during the pandemic. Traders are watching closely for Friday’s Baker Hughes rig count and further inventory data for signs of ongoing supply-demand imbalances.
China’s Economic Data and Crude Surpluses Weigh on Sentiment
China’s crude demand outlook remains murky, despite a temporary 90-day U.S.-China tariff pause. April data revealed slowing industrial output and retail sales, disappointing traders who had hoped for signs of a stronger recovery. At the same time, refinery throughput declined while imports stayed high, resulting in a 1.89 million bpd crude surplus—the highest since June 2023.
This build-up reflects Chinese refiners stockpiling discounted Russian and Iranian barrels, further reducing spot market appetite and buffering against short-term supply shocks.
Geopolitical Risks Offer Limited Support as Market Focuses on Fundamentals
Midweek gains spurred by reports of potential Israeli military action against Iran quickly faded, with traders turning back to supply-driven pressures. Although such an escalation could threaten up to 1.5 million bpd of Iranian supply and even impact Strait of Hormuz flows, the market appears unconvinced of imminent disruption.
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