OIL FUTURES: Crude traces equities lower, shrugging off US inventory draw

Crude moved lower during midmorning New York trading May 18 as renewed weakness in US equity markets offset a larger-than-expected US inventory draw.

At 1453 GMT, NYMEX June WTI was down $1.07 at $111.33/b and ICE July Brent was down $1.10 at $110.83/b.

US commercial crude stocks fell 3.39 million barrels to 420.82 million barrels in the week to May 13, US Energy Information Administration reported May 18.

The exceeded recent market expectations and left inventories 13.9% behind the five-year average for this time of year.

Data released by the American Petroleum Institute on May 17 showed a tightening market in the US, with a 2.4-million-barrel crude draw for the week ended May 13, while analysts surveyed by S&P Global Commodity Insights May 16 had pointed to a 2.1-million-barrel build over the period.

Despite the tightened supply picture, oil prices came under pressure as US equity markets turned lower at the open amid a string of weaker-than-expected earnings reports from major US retailers.

Major US indices were trading down around 2% midmorning.

NYMEX June RBOB was down 9.73 cents at $3.8444/gal and June ULSD traded 6.26 cents lower at $3.7367/gal.

US gasoline stocks fell 4.78 million barrels to 220.19 million barrels, EIA said. The seventh straight week of inventory declines left stocks 7.6% behind the five-year average for this time of year.

Distillate stocks, in contrast, saw their first build in six weeks, climbing 1.24 million barrels to 105.26 million barrels. Distillate stocks remain tight, however, at 22.5% below the five-year average.

"What started out as a tight middle distillate market appears to be spreading into the gasoline market, at least for the US. [Gasoline inventories] are now below the low end of the five-year range," wrote ING commodities strategists Warren Patterson and Wenyu Yao wrote in a May 18 note.

Crude futures had seen support overnight amid optimism that easing pandemic lockdowns in China could spur increased energy demand there.

Shanghai officials said late on May 17 that all 16 districts of the Chinese financial hub had achieved zero COVID at the community level and were prepared to ease lockdown restrictions. The city's deputy mayor Zong Ming set June 1 as the target date to "normalize management and fully restore normal production and life in the city."