US crude oil stocks decreased by 3.6 MMBbl last week. Gasoline and distillate inventories increased by 3.4 MMBbl and 2.7 MMBbl respectively. Yesterday afternoon, API had reported crude oil and gasoline builds of 0.9 MMBbl and 4.4 MMBbl respectively, while reporting a small distillate draw of 36 MBbl. On the contrary, analysts had expected a crude oil withdrawal of 1.6 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a large increase of 6.6 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 13 MBbl/d from last week per EIA’s estimate. Imports were up 1.1 MBbl/d last week to an average of 8.9 MMBbl/d. Refinery inputs averaged 17.3 MMBbl/d (347 MBbl/d more than last week), leading to a utilization rate of 94.1%. Although the total petroleum products build could be interpreted as bearish, the higher than anticipated crude oil withdrawal is interpreted as bullish. WTI prices are up $0.25/Bbl to $49.82/Bbl at the time of writing.
WTI Prices Trading Up On Storage Release
WTI prices have been trading down recently, due to stubbornly high inventories, rising U.S production, and continuing doubts regarding the extension of quotas by OPEC and non-OPEC producers. OPEC still has not announced anything concrete about the quota extensions. Although Saudi Arabia has been hinting that they would support extensions, no final decision will be made before the May 25th meeting. Russia said on Monday that, its oil output could climb to the highest rate in 30 years if OPEC and non-OPEC producers do not extend their supply reduction deal beyond June 30. Until a decision is made on the quota extension, WTI prices will remain under pressure and struggle to find near term direction. 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. There can be no sustainable rise in crude oil prices without a correction of inventories back to levels from prior to the price crash. Drillinginfo believes that the low end of the new range still remains at $47.00/Bbl, having tested that level multiple times and failing to break below. Recent price action has developed the high end of the new range at the mid-$53/Bbl level. Expect any price increases to be sold in hedging activities by producers.
Please find the updated Drillinginfo charts on the link below:
Petroleum Stocks Chart