US crude oil stocks increased by 0.6 MMBbl last week. Gasoline and distillate inventories decreased by 2.6 MMBbl and 4.9 MMBbl respectively. Yesterday afternoon, API had reported a crude oil withdrawal of 0.89 MMBbl alongside declines of 0.89 MMBbl for gasoline and 4.3 MMBbl for distillate inventories. Analysts had expected a crude oil build of 3.4 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a large decline of 11.0 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 24 MBbl/d from last week per EIA’s estimate. Imports were down 1.2 MMBbl/d last week to an average of 7.3 MMBbl/d. Refinery inputs averaged 15.3 MMBbl/d (187 MBbl/d less than last week), leading to a utilization rate of 84.3%. The petroleum stocks report is bullish, due to the large total petroleum inventories withdrawal. WTI prices are up $1.00/Bbl, trading at $54.59/Bbl at the time of writing.
WTI prices have maintained within the $50-55/Bbl range, however they have been edging closer to the $55/Bbl mark since the IEA and OPEC reports showed 90%+ compliance with quotas. The high compliance levels have not lifted prices above $55/Bbl so far, as it appeared to be largely factored in. Any bullish sentiment is largely built on hopes that existing cuts will work to quickly normalize inventories, expectations of further OPEC cuts, or an extension of the cuts beyond the agreed upon six months. However, high inventory levels, rising US rig count, and the possibility of growing production out of Nigeria and Libya (exempt from quotas) continue to keep a lid on prices. The current 650 MBbl/d supply deficit reported by the IEA is not large enough to normalize OECD inventories. The speculative long position in the market is concerning, as speculators have increased their bullish bets to a new record high. Drillinginfo still expects prices to stay range-bound between $50-$55/Bbl in the short term. The inventory overhang 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