I just looked at the performance of crude oil and gasoline for next Wednesday, and it’s quite interesting. The WTI August contract closed slightly higher by $0.07 (up 0.09%), while RBOB gasoline rose by $2.67 (up 1.07%), also setting a 5-week high. It was a bit weak in the early session, but then the rebound came back.

The key is the crack spread—the crack spread climbed to a 4-week high on Wednesday, which immediately kicked the market into gear. When refiners saw the crack spread strengthening, they started aggressively buying crude oil to process into gasoline and distillate fuel, which in turn supported crude oil prices. However, there was indeed pressure in the early session: the U.S. dollar index surged to an 8-week high, and on top of that, EIA crude oil inventories unexpectedly increased, both weighing on oil prices.

On the fundamentals, the Middle East situation remains an underlying concern. Israel is carrying out military operations in Rafah in southern Gaza, and the Red Sea Houthi forces have continued to attack commercial ships, causing shipping routes to bypass the southern tip of Africa and disrupting the global crude oil supply chain. On the other hand, OPEC+ plans to resume some production in Q4, which has the market worried about potential oversupply.

The EIA data was basically all bearish. Crude oil inventories unexpectedly increased by 3.59 million barrels (the expectation was a decrease of 2.80 million barrels). Gasoline inventories also unexpectedly increased by 2.65 million barrels. Distillate fuel inventories, although down, fell by less than expected. However, inventories at Cushing (the WTI delivery location) fell by 226,000 barrels, which is a small bright spot. Overall, U.S. crude oil inventories are still 1.5% below the 5-year average, but given the strong crack spread performance, there may be support in the short term.