Estimates from 11 analysts and traders showed U.S. oil inventories are projected to fall by 1.6 million barrels for the week ended April 1. Nine of the analysts forecast a decrease, while two predicted an increase. Forecasts range from a decrease of 3.5 million barrels to an increase of 1.5 million barrels.

The closely watched survey from the DOE’s Energy Information Administration is scheduled for release at 10:30 a.m. ET Wednesday.

Gasoline stockpiles are expected to fall by 200,000 barrels from the previous week, according to analysts. Estimates range from a decrease of 2.9 million barrels to an increase of 1.5 million barrels.

Stocks of distillates, which include heating oil and diesel, are expected to decrease by 200,000 barrels from the previous week. Forecasts range from a decrease of 2.5 million barrels to an increase of 2.3 million barrels.

Refinery use likely rose by 0.3 percentage point from the previous week, to 92.4% of capacity. Forecasts range from a decrease of 0.5 percentage point to an increase of 0.6 percentage point. Two analysts didn’t make a forecast.

The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week showed a 1.1-million-barrel increase in crude supplies, a 543,000-barrel fall in gasoline stocks and a 593,000-barrel rise in distillate inventories, according to a source.

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“The EU (European Union) is still unlikely to ban Russian oil and gas imports because it would not be possible to find an alternative supply of the latter in particular at short notice, meaning such a step would have serious economic consequences,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note. “Nonetheless, this topic is likely to move further into focus again after having seemingly taken more of a back seat of late, while the uncertainty surrounding the payment modalities for purchases of Russian gas has also abated,” he said.

The oil market was volatile last week, slumping as the U.S. announced the release of 1 million barrels a day of crude for the next six months from its Strategic Petroleum Reserve, while the International Energy Agency on Friday said they would release additional barrels.

In other news, Saudi Aramco announced Monday that it raised its May oil prices for customers in all regions, with prices for the four types of oil it sells to the U.S. up by $2.20 a barrel from April. That also helped to bolster oil prices Monday, said Sevens Report Research’s Richey. Still, “there are some technical cracks emerging in the uptrend,” suggesting that WTI is potentially poised for a corrective pullback into the low to mid $90’s, Richey said. “That would very likely occur on any positive developments in ceasefire negotiations between Russia and Ukraine.”

Meanwhile, rising COVID-19 cases in China has raised expectations for a decline in energy demand. The country last month locked down Shanghai, its largest city and financial capital, as part of its zero-COVID policy.

Investors were also weighing the announcement late Friday of a two-month truce in Yemen between a Saudi-affiliated coalition and Iran-backed Houthi rebels. Crude-oil volatility had been amplified in recent weeks amid Houthi drone attacks on Saudi oil facilities.

Price action

• West Texas Intermediate crude for May delivery rose $3.58, or 3.4%, to settle at $107.82 a barrel on the New York Mercantile Exchange after posting a loss of 1.6% on Tuesday.
• May Brent crude, the global benchmark, rose $3.22, or 2.9%, to $113.45 a barrel on ICE Futures Europe, following a 2% loss a day earlier.
• May natural gas rose 5.2% to $5.605 per million British thermal units.
• April gasoline rose 3.8% to $3.325 a gallon and April heating oil climbed 2.5% to $3.809 a gallon.

Market drivers

Oil prices clawed back Tuesday’s losses and then some. Tuesday’s decline came as hopes over signs of progress between Russian and Ukraine negotiators drove investors out of the commodity. Russia’s Deputy Defense Minister Alexander Fomin reportedly said his country would decrease military activity in the direction of Kyiv and Chernihiv.

But Kremlin spokesman Dmitry Peskov was reported as saying . Wednesday that Russia hadn’t noticed anything “really promising” in those Ukraine proposals on Tuesday. Ukrainian President Volodymyr Zelensky and U.S. officials also cast doubt on whether any pledge to pull Russian troops back amounted to a shift. Pentagon spokesman John Kirby said the U.S. had detected a small number of Russian ground forces backing away from Kyiv, but it looked like forces were just being repositioned.

“Whether peace talks are real or not, the truth is that we have a global market that is under supplied regardless,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily report. Oil prices put the war premium in and they can take it out, but “after the smoke clears…we’re back to being under supplied.

Meanwhile, the slide in crude this week, which has at times surpassed 10%, “has made it even less likely that OPEC+ will decide at its meeting tomorrow to step up its production to a greater extent,” said Carsten Fritsch, analyst at Commerzbank, in a note to clients. In a July meeting last year, OPEC+ said that starting May 1, 2022, baeline output for the group would see a modest increase for some members, but the group as whole has been unable to meet their full production quotas. Troy Vincent, senior market analyst at DTN, told MarketWatch that he does not expect the revised baselines to change the course of the current monthly increases. “While this baseline change may slightly impact individual member’s share of the rising output going forward, it shouldn’t impact the total volume,” he said.

Elsewhere, Poland announced a plan to wean itself off Russian oil imports by the end of 2022, while Germany triggered an early warning over natural gas supplies, calling on consumers to conserve energy amid Russia’s demand that it pay for the commodity in rubles.

Supply data

The Energy Information Administration reported on Wednesday that U.S. crude inventories declined by 3.4 million barrels for the week ended March 25, down a second straight week. On average, the EIA was expected to show crude inventories down by 1.7 million barrels, according to analysts surveyed by S&P Global Commodity Insights. The American Petroleum Institude on Tuesday reported a 3 million-barrel decrease, according to sources. The EIA also reported weekly inventory increases of 800,000 barrels for gasoline and 1.4 million barrels for distillates. The analyst survey showed expectations for weekly supply declines of 1.9 million barrels for gasoline and 1.5 million barrels for distillates.

Both gasoline and distillate supplies rose as “implied demand has dropped for both,” especially for distillates, said Matt Smith, lead oil analyst, Americas, at Kpler. Crude stocks at the Cushing, Okla., Nymex delivery hub edged down by 1 million barrels for the week, while stocks in the Strategic Petroleum Reserve fell by 3 million barrels, EIA data showed.

Russia’ unprovoked Feb. 24 invasion of Ukraine sent crude prices soaring, with both WTI and Brent trading near 14-year highs in early March.. The U.S. and its allies have imposed sweeping sanctions on Moscow aimed at cutting the country off from the global economy, though only the U.S. and U.K. have formally moved to ban imports of Russian oil and energy products. Citing industry data and Bloomberg, analysts at Commerzbank said Russian oil exports in the week from March 17-23 averaged 3.63 million barrels per day down 26.4% from the preceding week.

Some market participants have been reluctant to buy or finance the trading of Russian crude despite the lack of a wider embargo. “Russian oil is still difficult to sell. Three oil tankers with a total of 280,000 tons of Urals on board have been anchored in the Mediterranean for 7-10 days, according to Bloomberg data, and are waiting in vain to be unloaded,” Commerzbank said.

Oil prices saw “further downward pressure due to Shanghai imposing a two-stage lock down,” said Kapadia. The move sparked worries about crude demand. Crude prices had dropped by around 7% Monday after China imposed a lock down on Shanghai, the nation’s financial capital and largest city, as part of its effort to stop a renewed spread of COVID-19 cases.

Meanwhile, OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia, will meet this week. Analysts appear to widely expect the group to stick to its plan to boost production by another 400,000 barrels a day in May. In a July meeting last year, OPEC+ said that starting May 1, 2022 baseline output for group would see a modest increase for some members, but the group as whole has been unable to meet their full production quotas.

The Energy Information Administration will release its data on U.S. petroleum supplies Wednesday, covering the week ended March 25. On average, analysts forecast supplies declines of 1.7 million barrels for crude, 1.9 million for gasoline and 1.5 million for distillates, according to an S&P Global Commodity Insights survey.