US crude oil stocks posted a decrease of 8.6 MMBbl from last week. Gasoline and distillate inventories decreased 1.9 MMBbl and 0.3 MMBbl. Yesterday afternoon, API reported a crude oil draw of 4.2 MMBbl while reporting gasoline and distillate draws of 1.9 MMBbl and 0.3 MMBbl, respectively. Analysts were expecting a crude oil build of 3.5 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a major decrease of 17.9 MMBbl. In large part, the inventory declines are due to the lower imports this week. Crude oil imports were down 1.6 MMBbl/d last week, to an average of 5.9 MMBbl/d. As featured on our Week Ahead report, we had already seen that waterborne crude imports have fallen again this week based on bills of lading. 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. Refinery inputs averaged 15.9 MMBbl/d (179 MBbl/d more than last week), leading to a utilization rate of 87.1%. Prices are increasing after a bullish inventory report, which shows a surprise decline in inventories for the first time in six weeks. Declining Venezuelan and Iranian productions are still supporting prices, but the pressure comes from concerns on global economic and demand growth with uncertainty around the US-China trade dispute. Prompt-month WTI was trading up $1.59/Bbl, at $57.09/Bbl, at the time of writing.
Prices have been increasing on the back of the OPEC-led supply cuts. Venezuelan declines, Libyan outages, and sanctions on Iran and Venezuela have all been supporting prices. The bullish inventory report today is also welcome news for the bulls. Saudi Arabian Energy Minister Khalid al-Falih said today that he is thinking about recommending an extension of the supply cuts after June. This is despite President Trump calling for OPEC to “take it easy” in recent Tweets, commenting that oil prices were getting too high. Khalid al-Falih also said that they would take the measure to extend production cuts only if the fundamentals require it but are also ready to ease cuts should the market tighten too much. The overhanging bearish sentiment in the market remains the US-China trade talks and the potential for a global economic slowdown should an agreement not be reached between the countries. Moving forward, Drillinginfo expects that the market will continue to trade on the news around the trade talks and the potential for an extension of the supply cuts. However, the trade shouldn’t get ahead of itself, and should keep an eye on the fundamentals, which still show that we are oversupplied as we head deeper into refinery maintenance.