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Oil prices rebounded from midday weakness to close at 2-month highs with WTI at $120 after Goldman hiked its crude price forecasts and rebounding demand hopes from China

“The true fundamentals in crude, gasoline and diesel remain bullish, although prices have risen a bit too far too fast,” said Dennis Kissler, senior vice president of trading at BOK Financial.

The Energy Information Administration revised down their forecasts for gasoline consumption in its latest monthly report, but as long as inventories remain so far below the 5-year average it’s extremely bullish, he said.

For now, the next leg will depend on inventory data tonight and tomorrow’s demand signals.

API

• Crude +1.845mm (-2.2mm exp)

• Cushing -1.839mm

• Gasoline +1.821mm

• Distillates +3.376mm

A more worrisome set of data from API with crude stocks building unexpectedly along with products seeing inventories rise (gasoline stocks up by the most since January)

Source: Bloomberg

Does this suggest demand destruction is beginning?

WTI was trading just below $120 ahead of the API data and dipped after

Rebecca Babin, senior energy trader at CIBC Private Wealth Management warns, “I am concerned US demand will not live up to expectations and we will see demand destruction here.”

But for now, demand destruction in gasoline at the pump , for instance, remains modest at its worst.

Goldman says $160 crude – which implies near $6 gasoline at the pump – is when demand destruction will truly strike.