US crude oil stocks increased by 13.8 MMBbl last week. Gasoline inventories decreased by 0.9 MMBbl while distillate inventories remained unchanged. Yesterday afternoon, API had reported a crude oil build of 14.2 MMBbl alongside builds of 2.9 MMBbl for gasoline and 1.4 MMBbl for distillate inventories. Analysts had expected a crude oil build of 2.4 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted an increase of 1.4 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 63 MBbl/d from last week per EIA’s estimate. Imports were up 1.1 MMBbl/d last week to an average of 9.4 MMBbl/d. Refinery inputs averaged 15.9 MMBbl/d (54 MBbl/d less than last week), leading to a utilization rate of 87.7%. The petroleum stocks report is bearish, due to the large crude stocks build. However, the market is choosing to focus on the unexpected gasoline withdrawal and WTI prices are up $0.29/Bbl, trading at $52.46/Bbl at the time of writing.
Although WTI prices continue to trade in the $50-55/Bbl range, prices have been posting losses for the past two days. WTI prices are still being pulled both directions mainly by the bullish production cut estimates from OPEC and non-OPEC countries carrying quotas and bearish sentiment regarding US shale production potential and consistently rising crude and petroleum stocks in the last three weeks. In addition to increasing US shale production, the rising US dollar as well as signs pointing towards slowing global crude demand support the bearish sentiment. China’s 2016 oil demand grew at its slowest pace in three years, which introduced uncertainty around demand expectations. The market is still waiting on third party data regarding quota compliance which is scheduled to be released February 10th (this Friday). The managed money segment (speculators) are betting on acceptable levels of quota compliance, as they have continued to build length (according to the January 31st CFTC report). However, rising US shale production, the rapid pace at which rigs are being added, and rising crude stocks continue to keep a lid on WTI prices. The producers continue to sell as prices rise (hedging production) and add rigs. Drillinginfo still expects prices to stay range-bound between $50-$55/Bbl in the short term as the market awaits definitive third party data regarding quota compliance (Feb. 10th for data from the IEA) and monitors the troubling inventory data that continues to hint at an imbalance.
Please find the updated DrillingInfo charts on the link below: