Crude Prices Jump on Possible US-India Trade Deal and Lower EIA Inventories

Crude oil and gasoline prices surged to one-week highs, primarily fueled by an unexpected decline in weekly EIA crude inventories and the Trump administration's announced plan to refill the Strategic Petroleum Reserve. Further support came from reports of a potential US-India trade deal that could redirect Indian crude demand, reduced Russian exports due to Ukrainian attacks, and a decrease in crude held on tankers. These bullish factors largely outweighed longer-term concerns about a projected 2026 global oil surplus and anticipated increased Iraqi production.

Analysis

December WTI crude oil and RBOB gasoline rallied sharply, closing up +2.20% and +2.12% respectively, reaching one-week highs. This surge was primarily driven by an unexpected -961,000 bbl decline in weekly EIA crude inventories, contrasting expectations for a +2.18 million bbl build, alongside a -2.1 million bbl draw in gasoline supplies. US crude oil inventories are now -4.0% below the seasonal 5-year average.

Further support stemmed from the Trump administration's plan to refill the Strategic Petroleum Reserve by 1 million bbl in December and January, and reports of a potential US-India trade deal that could reduce India's Russian crude imports. Reduced Russian crude exports, down to 1.88 million bpd in early October due to Ukrainian attacks on refineries, also contributed to price strength, alongside a -12% w/w decrease in crude stored on tankers.

However, longer-term bearish pressures include the IEA's forecast of a record 4.0 million bpd global oil surplus by 2026 and Iraq's potential addition of 500,000 bpd to global markets upon resuming Kurdish oil exports. Cooling Middle East tensions following the Israel-Hamas ceasefire also reduced the geopolitical risk premium, partially offsetting current bullish momentum. US crude oil production slightly decreased to 13.629 million bpd, falling from a record high.

Key Decisions for Investors

• Investors should consider the immediate bullish catalysts from unexpected inventory draws and strategic reserve refills, which provide near-term price support.
• Monitor geopolitical developments, specifically the potential US-India trade deal and ongoing Russia-Ukraine conflict impacts on supply, as these could significantly alter demand and export dynamics.
• Maintain vigilance on longer-term supply forecasts, such as the IEA's projected 2026 surplus and increased Iraqi production, which present a bearish overhang despite current market strength.