US crude oil stocks decreased by 5.2 MMBbl last week, alongside a distillate withdrawal of 1.6 MMBbl, while gasoline inventories posted a smaller draw of 0.2 MMBbl. Yesterday afternoon, API had reported a crude oil and gasoline withdrawal of 1.8 MMBbl and 2.6 MMBbl respectively, as well as a 2.0 MMBbl distillate withdrawal. Analyst had expected a much lower crude withdrawal of 0.3 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a withdrawal of 3.6 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 21 MBbl/d from last week per EIA’s estimate. Imports were down 644 MBbl/d last week to an average of 7.6 MMBbl/d. Refinery inputs averaged 16.8 MMBbl/d (418 MBbl/d less than last week), leading to a utilization rate of 91.5%. The petroleum stocks report is bullish, due to the higher than expected withdrawal in crude oil and withdrawal in total petroleum inventories. WTI prices are up $1.48/Bbl to $47.36/Bbl at the time of writing.
WTI prices have been trading in the $45-47/Bbl range. Last week prices dipped to their lowest levels since late November with concerns over rising global supply and stubbornly high inventory levels. OPEC and Saudi Arabia have been strongly hinting on extending production cuts. On Monday, Saudi Arabia energy minister Khalid al-Falih said production cuts by OPEC could be extended into the 2nd half of the year and possibly beyond. On more bullish news, a Reuters report on Tuesday stated that Saudi Aramco will cut oil supplies to Asia by about 7 MMBbl in June as part of the OPEC’s deal to reduce production. Following these news, more support for the production cuts came on Wednesday as Algeria and Iraq stated they favor extending the cuts when OPEC meets later this month. This could indicate that the Kingdom and OPEC is trying to show it is trying to reduce the global oversupply.
The bullish news from OPEC gave very little support to prices, as the price lift today is largely due to EIA’s report. The bearish sentiment from increasing US production, possibility of Libya production growing further and high inventory levels still remains a big concern. The bearish sentiment grew Tuesday as EIA’s latest report showed a higher crude production forecast for 2017 and 2018. OPEC still has not announced anything concrete about the quota extensions and no final decision will be made before the May 25th meeting. The expectations of a quota extension will lend some support to prices, as increasing US activity and high inventory levels will continue keeping a lid on prices. Without an extension of the quotas with continued high compliance, inventories can’t be normalized, especially given the IEA’s most recent downward revision of demand expectations. It is also important to note that, a higher price environment after the OPEC meeting may increase concerns further over increasing US production. As prices breached last week’s low and dipped to their lowest since late November, WTI price action has now expanded the range lower and brought the high end of the near term range down. DrillingInfo expects some consolidation in price action over the coming week with prices trading between the lows of November 2016 at $42.20/Bbl (which will find buyers) and the highs of last week ($50.22/Bbl), which should attract sellers.
Please find the updated Drillinginfo charts on the link below:
Petroleum Stocks Chart
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