Crude oil futures tick lower on profit-taking, mixed EIA data

0306 GMT: Crude oil futures were lower during mid-morning trade in Asia June 4 as the market used mixed data from the Energy Information Administration as an excuse to lock in profits following the recent surge in oil prices, while a stronger dollar provided further headwinds for the market.

At 11:06 am Singapore time (0306 GMT), the ICE Brent August contract was down 26 cents/b (0.36%) from the previous settle at $71.05/b, while the July NYMEX light sweet crude contract was down 19 cents/b (0.28%) at $68.62/b.

Data from the EIA released late June 3 was mixed, as it showed a draw in US commercial crude inventories, but builds in US product inventories.

Rising refinery demand coupled with lower production saw crude stocks fall 5.08 million barrels to 479.27 million barrels in the week ended May 28, the data showed. Crude stocks are at its lowest since the week ended Feb. 19, nearly 3% behind the five-year average.

US gasoline and distillate inventories, meanwhile, climbed 1.5 million barrels and 3.72 million barrels to 233.98 million barrels and 132.8 million barrels, respectively.

"After an impressive rally that saw oil prices settle near multi-year highs on June 3, market participants took the builds in the downstream product inventories as a reason to pause and lock-in their profits," Vandana Hari, CEO of Vanda Insights, told S&P Global Platts June 4.

Hari, however, added that the builds in gasoline and distillate inventories belied strong demand for these products in the US. Other analysts have echoed a similar view, and are in particular optimistic over the prospect of a surge in gasoline demand, as Americans are expected to unleash pent-up demand for travel on the roads during the country's ongoing summer driving season.

The EIA data also showed strong gasoline demand last week, as even though weekly implied gasoline demand fell 330,000 b/d to 9.15 million b/d, the four-week moving average of gasoline demand pushed to 9.16 million b/d, the highest since March 2020.

Adding downward pressure on the oil markets was the appreciation in the US dollar, which came as the US Federal Reserve announced plans to wind down the corporate bond portfolio it bought during the pandemic, lending credence to the notion that it is considering further policy unwinds.

At 10.53 am, the June contract for the ICE US Dollar Index was trading at 90.54, up 0.71% from its previous settle.

With this week's major news items already baked into oil prices, market analysts believe that the market's future price trajectory is now tethered to sentiment in the broader financial markets.

"Crude market participants will now be looking forward to US May Nonfarm Payrolls data, which can potentially move the broader market sentiment on way or another," Hari said.