US crude oil stocks increased by 9.5 MMBbl last week. Gasoline inventories increased by 2.8 MMBbl while distillate inventories decreased by 0.7 MMBbl. Yesterday afternoon, API had reported a crude oil build of 9.94 MMBbl alongside builds of 0.72 MMBbl for gasoline and 1.5 MMBbl for distillate inventories. Analysts had expected a crude oil build of 3.5 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a massive increase of 11.1 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be down 1 MBbl/d from last week per EIA’s estimate. Imports were down 881 MBbl/d last week to an average of 8.5 MMBbl/d. Refinery inputs averaged 15.5 MMBbl/d (435 MBbl/d less than last week), leading to a utilization rate of 85.4%. The petroleum stocks report is bearish, due to the large crude stock and total petroleum inventories build. However, the market brushed off the bearish stock report and is choosing to focus on OPEC cuts. WTI prices are up $0.11/Bbl, trading at $53.31/Bbl at the time of writing.
WTI prices have maintained the $50-55/Bbl range. WTI prices are being propped up by the IEA and OPEC reports showing higher than expected (90% and 93% respectively) compliance with quotas. Following compliance data, however, prices did not break out of the range, as the news appeared to be largely factored in. According to the latest IEA report, there is currently a 650 MBbl/d supply deficit. However, the large stock overhang and the prospect of US shale production growth continue to cap any gains. The extremely high level of inventories in OECD countries with the current supply deficit, doesn’t normalize inventories by the end of 1H2017. This implies that, at the least, the OPEC cuts need to be extended past the agreed upon six-month period. Rig additions continue to fuel concerns regarding the potential for production growth in the US. Additionally, Fed Chair Janet Yellen signaled a faster pace for raising interest rates, making the dollar more valuable, pressuring crude oil prices further. Drillinginfo still expects prices to stay range-bound between $50-$55/Bbl in the short term. The troubling inventory data and US shale production prospects may introduce a downside bias given the speculative length growing impatient waiting for higher prices.
Please find the updated DrillingInfo charts on the link below:
Petroleum Stocks Chart