Volatility in crude markets remain high as WTI, brent surge more than 3%

WTI surged above $60 on Tuesday, while brent jumped above $64 — Crude futures surged more than 3% continuing its recent path of volatility, ahead of the American Petroleum Institute’s weekly inventory report after the close on Tuesday.

On the New York Mercantile Exchange, WTI crude for July delivery soared 1.95 or 3.36% to $60.09, closing at its highest level in six sessions. WTI crude futures traded between a range of $58.24 and $60.24 on Tuesday.

On the Intercontinental Exchange (ICE), brent crude for July delivery also jumped more than 3.3%, rising 2.14 to $64.91. The spread between the international and U.S. domestic benchmarks of crude rose to $4.82, above Monday’s level of $4.55.

Volatility in the energy futures market remained high. Tuesday’s surge marked the sixth time in the last nine sessions that crude futures have moved more than 1.75% in either an up or down direction. In early-May, crude moved above $61 a barrel for the first time in four months after dropping below $45 in the winter.

Energy traders await the release of Tuesday’s API weekly crude stockpiles for a better indication of current U.S. crude inventory levels. Analysts expect that U.S. stockpiles rose last week by 1.8 million barrels, halting a streak of four consecutive weeks of draws. The Energy Information Administration (EIA) said last week that U.S. crude inventories decreased by 1.9 million barrels for the week ending May 29, in line with forecasts of a 2.0 million draw. U.S. crude stockpiles still remain at 477.4 million barrels, its highest level at this time of year in at least 80 years.

Also on Tuesday, the EIA revised its forecasts for short-term crude prices in a monthly report. The EIA expects that WTI crude will average $55.35 for the remainder of 2015, more than $5 a barrel less than brent crude prices. For 2016, the EIA predicts that Texas Long Sweet futures will average $62.04 a barrel – exactly $5 a barrel lower than its counterpart from the North Sea. In addition, the EIA said current option and futures contract for December, 2015 delivery suggest that crude will be priced between $40 and $92 a barrel at year’s end.

In China, CPI inflation data for May ticked up by 1.2%, slightly below forecasts for a 1.3% increase and lower than April’s rise of 1.5%. The modest inflationary gains underscore the possibility for further stimulus measures by the People’s Bank of China. The bank has already eased monetary policy three times over the last year in an effort to jumpstart the economy.

China is the world’s largest importer of crude and the second-largest consumer behind the United States.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell 0.10% to 95.13.


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