OIL FUTURES: NYMEX RBOB retreats as post-July 4 demand slump sends US gasoline stocks higher

NYMEX RBOB futures settled lower July 13 after US Energy Information Administration reported a counter-seasonal build in nationwide gasoline stocks amid a sharp pullback in demand.

NYMEX August RBOB settled down 3.09 cents at $3.2337/gal while August ULSD climbed 33 points to finish at $3.6659/gal.

Total US gasoline inventories climbed 5.83 million barrels to 224.94 million barrels in the week to July 8, US Energy Information Administration data showed July 13, leaving stocks 5.7% behind the five-year average for this time of year, in from 8.2% the week prior.

The build came in well above market expectations. Analysts surveyed by S&P Global Commodity Insights July 11 had pointed to a 200,000-barrel decline in gasoline stocks in the week to July 8, however American Petroleum Institute data released late July 12 had shown a nearly 3-million-barrel build over the period.

Total product supplied for gasoline, EIA's proxy for demand, plunged 14% to a six-month-low 8.06 million b/d. It was the largest one-week decline in implied gasoline demand since the week ended Dec. 31, and left demand nearly 13% below normal.

The NYMEX RBOB contract, which is settled via delivery in New York Harbor, saw additional pressure as EIA said East Coast gasoline stockpiles were up 2.69 million barrels last week to 55.238 million barrels, the highest reported level since the week ended April 8.

The ICE NYH RBOB crack versus Brent fell to around $29.75/b in afternoon trading, down from $31.49/b the session prior and on pace to close below $30/b for only the second time since April.

NYMEX August WTI settled 46 cents higher at $96.30/b and ICE September Brent climbed 8 cents to finish at $99.57/b.

Crude prices had moved sharply lower ahead of the US open on the heels of a higher-than-expected US inflation reading of 9.1% for June. However, prices later recovered as tight global supply outlooks continued to offer a bullish counterpoint to recession fears.

"It is pretty much a battle between physical and paper markets. [Paper] traders believe the economy will go into recession, but [the] physical market remains tight, we have sanctions [in both the US and Europe] and also we have the Middle East as Biden will probably leave with empty hands from Saudi Arabia [...] so this battle will keep high volatility on [crude oil] prices", said Ole Hansen, the head of commodity strategy at Saxo Bank.

US commercial crude stocks climbed 3.25 million barrels to 427.05 million barrels, EIA said. However, stockpiles of crude in the nation's Strategic Petroleum Reserve plunged 6.88 million barrels to 485.15 million barrels, taking total US crude stocks to an 18-year-low 912.2 million barrels.

OPEC, in its latest monthly report released July 12, forecast oil demand rising 2.70 million b/d to 102.99 million b/d in 2023. However, global production may fall short of such strong demand, according to the market estimates.

"In order to balance the global market next year, OPEC would need to produce on average 30.1 [million b/d], which is around 1.4 [million b/d] above [what] the group is currently producing. Given that OPEC has struggled to hit their production target for months, it will likely be a struggle for the group to hit this production level, which suggests that ... tightness in the global oil market will persist through 2023," Warren Patterson, head of commodities strategy at the ING bank, said in a July 13 note.