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Crude Oil Withdrawal Below Analyst Expectations

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US crude oil stocks decreased by 0.9 MMBbl last week, alongside a distillate withdrawal of 0.6 MMBbl, while gasoline inventories posted a build of 0.2 MMBbl. Yesterday afternoon, API had reported a crude oil withdrawal of 4.2 MMBbl, nearly double the expectations of analysts. The most important number to keep an eye on, total petroleum inventories, posted a build of 1.3 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.

US production was estimated to be up 28 MBbl/d from last week per EIA’s estimate. Imports were down 648 MBbl/d last week to an average of 8.3 MMBbl/d. Refinery inputs averaged 17.2 MMBbl/d (108 MBbl/d less than last week), leading to a utilization rate of 93.3%. The petroleum stocks report is bearish, due to the lower than expected withdrawal in crude oil and the build in total petroleum inventories. WTI prices are down $0.22/Bbl to $47.44/Bbl at the time of writing.

Source: EIA

WTI prices slid on Tuesday following a host of bearish news. Libya looks poised to increase production following news that rival factions are nearing a political solution to the conflict. Additionally, the Reuters survey regarding OPEC production in April showed lower compliance with quotas than the month prior mainly due to higher Angolan and UAE production. The survey offset the bullish sentiment from Russia announcing on Monday that it had met its 300 MBbl/d production cut quota a month ahead of schedule. The rising US rig count and production expectations have also continued to keep a lid on any possible price increases. Prices breached last week’s low and look to be on track to test the low end of the range at $47/Bbl, which was tested multiple times in March before heading to the high end of the range. OPEC still has not announced anything concrete about the quota extensions and no final decision will be made before the May 25th meeting. Whereas high inventory levels and increasing US activity will keep a lid on prices, the expectations of a quota extension will lend support. 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. In the near term, Drillinginfo believes that the low end of the range ($47.00/Bbl) will be up against its first major test since the short covering rally in early March.

Please find the updated Drillinginfo charts on the link below:
Petroleum Stocks Chart

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Sarp is Senior Director of Power & Renewables Analytics at Enverus. He has research and modeling experience in the upstream, downstream and power markets and has presented his work at various academic conferences around the world, including those organized by the SPE and the IAEE. He has also been published in the SPE Economics & Management Journal for his work on the long-term economic viability of production from unconventional liquids-rich reservoirs. Sarp’s focus on data-driven modeling and his ability to incorporate the effects of technological and market advances into analyses provides clients a thorough picture of the present and the future in their area of interest within the oil and gas industry. Sarp holds a Master of Science in Mineral and Energy Economics from the Colorado School of Mines, a Master of Science in Petroleum Economics and Management from the Institut Francais du Petrole (IFP School), and a Bachelor of Arts in Economics from the University of Chicago.