US crude oil stocks increased by 4.1 MMBbl last week. Gasoline and distillate inventories increased by 5.0 MMBbl and 8.4 MMBbl respectively. Yesterday afternoon, API had reported a crude oil and distillate build of 1.5 MMBbl and 5.5 MMBbl respectively as well as a gasoline build of 1.7 MMBbl. Analysts had expected a crude oil and distillate build of 1.2 MMBbl and 0.9 MMBbl respectively as well as a gasoline build of 1.6 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a large build of 13.4 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 176 MBbl/d from last week per EIA’s estimate. Imports were up 1.9 MMBbl/d last week to an average of 9.0 MMBbl/d. Refinery inputs averaged 17.1 MMBbl/d (418 MBbl/d more than last week), leading to a utilization rate of 93.6%. The main reason for the crude oil and imports increase are likely related to cargoes hitting the ports after being held on water to avoid taxation before the year-end. The petroleum stocks report is extremely bearish, as the total petroleum inventories reported a huge build, as well as crude oil and product builds came much larger than API and analyst expectations. However, crude prices did not take any loss from the extremely bearish report and actually rose following news of Saudi compliance with production cut, and supply cuts to Asia. Prompt month WTI prices are up $0.84/Bbl, trading at $51.66/Bbl at the time of writing.
WTI prices have been trading in the $50-55/Bbl range for the past couple of weeks. Although WTI prices tested the high end of the $50-55/Bbl range last week, prices dipped below $51/Bbl on Tuesday. The dip was led by reports that Iraq may not be complying with quotas, expectations of growing US production, and the strength of the dollar. The EIA’s said in its latest report that the increased drilling activity was set to boost crude oil production 110 MBbl/d in 2017, whereas the same report last month was predicting a decline of 80 MBbl/d. The rig count has been rising since mid-2016 and has reached levels that support growing production as per the EIA’s report. In other bearish news, Iraq has said it plans to raise crude exports from Basra too all-time highs in February. According to sources of loading data, Iraq’s exports to date in 2017 have remained steady at all-time highs despite the start of the quota enforcement on January 1st. On the bullish side, Saudi Arabia said last week that crude production in January would be decreasing by 486 MBbl/d (to 10.058 MMBbl/d), which would mean that the largest OPEC producer would be in compliance with its individual quota. Other OPEC members such as Qatar, Kuwait, and Oman have promised the same sort of compliance. Reports also suggest that Russia and Kazakhstan have reduced output, but a large portion of those declines may be seasonal. Prices are lurking at the lower end of the $50-55/Bbl range as the market comes to terms with what partial compliance with OPEC quotas combined with growing US production might mean for the timing of market rebalancing. Drillinginfo still expects prices to stay rangebound between $50-$55/Bbl as any moves outside of the range will be driven by fundamental data for January, which will not be available until later in the month.
Please find the updated DrillingInfo charts on the link below:
Petroleum Stocks Chart