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WTI Slides After Disappointing Crude Draw & Production Surge

WTI Slides After Disappointing Crude Draw & Production Surge

WTI prices dumped on last night’s surprise crude build but have limped back above $49 heading into the DOE prints this morning (although Russia sanctions headlines dipped it). DOE did not help as the report was a disappointment for the bulls with production rising to a new cycle high, crude inventories drawing less than expected but total U.S. oil inventories (that’s crude plus all products, including the often volatile “other oil” category) rose by 1.1 million barrels last week.

 

API

  • Crude +1.78mm (-3.1mm exp)
  • Cushing +2.562mm (-700k exp)
  • Gasoline -4.827mm (-1mm exp)
  • Distillates -1.225mm

DOE

  • Crude -1.53mm (-3.1mm exp)
  • Cushing -39k (-700k exp)
  • Gasoline -2.52mm (-1mm exp)
  • Distillates -150k

API’s surprise crude build was offset by DOE’s draw – but it was a disappointingly small draw… and gasoline’s draw was smaller than API’s…Cushing inventory is now down 15 of the last 16 weeks while crude inventories are down 15 of the last 17 weeks.

Gaoline demand rose to a new record high 9.84mm b/d.

Venezuela shipped 820,000 barrels a day, a 23 percent increase over last week, even amid reports that some U.S. refiners have started to seek alternatives to barrels from the imperiled Latin American producer.

As Bloomberg’s Javier Blas noites, Saudi Arabia has shipped 1.088 million barrels a day on average to the U.S. over the last twelve months. Last week, it shipped 1.174 million b/d, above the annual average and despite promises earlier this year that it will cut significantly supplies into the U.S. For the kingdom, the surge has two big problems: 1) it delays the rebalance of the U.S. market, 2) it destroys the credibility of Saudi oil minister Khalid Al-Falih, who put its reputation at risk promising publicly a “measured” drop in flows.

Crude Production (in the Lower 48) topped 9mm last week for the first time since July 2015, and this week it rose once again to a new cycle high…

 

WTI bounced back from the API surprise plunge but dropped into the DOE print on Russia sanctions headlines… and then extended its losses – back to API lows – on the production surge and total inventoiry build…

Nitesh Shah, a commodities strategist at ETF Securities told Bloomberg: “The headlines from Saudi Arabia’s export cuts a few days ago pushed prices over $50 but when you scratch under the surface there’s still a lot of bearishness out there.”

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