US crude oil stocks increased by 2.4 MMBbl. Gasoline inventories increased 0.5 MMBbl and distillate inventories decreased 3.0 MMBbl. Yesterday afternoon, API reported a crude oil build of 1.4 MMBbl, alongside a gasoline build of 1.9 MMBbl and a distillate draw of 2.2 MMBbl. Analysts, to the contrary, were expecting a crude oil draw of 0.8 MMBbl. Total petroleum inventories posted an increase of 0.7 MMBbl. For a summary of the crude oil and petroleum product stock movements, see the table below.
US crude oil production increased 100 MBbl/d last week, per the EIA’s estimates. Crude oil imports were down 0.7 MMBbl/d last week, to an average of 6.4 MMBbl/d. Refinery inputs averaged 16.5 MMBbl/d (0.2 MMBbl/d less than last week’s average), leading to a utilization rate of 89.8%. Prices continued their decline following the crude oil and total petroleum stocks build. Prompt-month WTI was trading down $1.22/Bbl, at $56.07/Bbl, at the time of writing.
Futures dipped to their lowest point since the attack on Saudi Arabian crude facilities on September 14. As before the attack, the escalating US-China tra11de war, worries about a global economic slowdown, and faltering energy demand weighed on market sentiment.
US President Donald Trump helped to rekindle fears that a trade deal between the world’s two largest economies is nowhere near being finished and that the ongoing trade war could further cripple the economic growth and petroleum demand. Trump, during his United Nations speech, accused China of unfair trade practices, currency manipulation, and intellectual property theft. He also added that he would not accept a “bad deal” between the US and China. In addition to the President’s comments, weak economic data from Europe and Japan also weighed on prices.
Although prices gave up most of their gains since the September 14 attack, the possibility of further escalation in Saudi-Iran tensions remains. It is also uncertain how long the United States will continue to sit on the sidelines. Finally, the damages at Abqaiq and Khurais appear to be too significant for a full restoration of production in just a few weeks. Saudi Aramco is drawing down inventories to meet term supply agreements and has brought forward domestic refinery maintenance to free up supplies for export. Spare production capacity is tight. Geopolitical risk remains even if current market sentiment doesn’t show it.