US crude oil stocks increased by 1.5 MMBbl last week. Gasoline and distillate inventories decreased by 0.5 MMBbl and 0.9 MMBbl respectively. Yesterday afternoon, API had reported a crude oil and gasoline build of 2.5 MMBbl and 1.84 MMBbl respectively, while reporting a decline of 3.73 MMBbl for distillate inventories. Analysts had expected a crude oil build of 2.8 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted an increase of 0.3 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 31 MBbl/d from last week per EIA’s estimate. Imports were up 0.3 MMBbl/d last week to an average of 7.6 MMBbl/d. Refinery inputs averaged 15.7 MMBbl/d (393 MBbl/d more than last week), leading to a utilization rate of 86.0%. The petroleum stocks report is bearish, due to the builds in crude and total petroleum inventories. WTI prices are up $0.15/Bbl, trading at $54.16/Bbl at the time of writing.
WTI prices have maintained within the $50-55/Bbl, trading closer to the $55/Bbl ceiling over the last week. Crude prices edged up this morning as a Reuters survey showed February supply from the 11 OPEC members carrying quotas averaging 29.87 MMBbl/d, down from 29.96 MMBbl/d in January and 31.17 MMBbl/d in December. The survey also showed that OPEC members have cut output by 1.098 MMBbl/d out of their pledged 1.164 MMBbl/d, which equates to 94 percent compliance. Saudi Arabia’s output cut has reached 744 MBbl/d, significantly above their pledged 486 MBbl/d, since it is trying compensate for the lack of compliance from members such as Algeria, Iraq, Venezuela, and UAE. Even with the bullish OPEC compliance estimates, the inventory overhang continues to keep prices from breaking out of the top of the current price range. The current 650 MBbl/d deficit does not allow for the normalization of inventory levels to 5-yr. averages from prior to the price crash. The market is looking for OPEC to extend the production cuts past the originally agreed upon six months and/or deepen the cuts. The growing US rig count continues to work against OPEC cuts, along with recovering production in Nigeria and Libya (who are exempt from the cuts). Drillinginfo still expects prices to stay range-bound between $50-$55/Bbl in the very short term. The longer prices stay range-bound at $50-$55/Bbl, the more likely record levels of speculative length grow impatient waiting for higher prices. This could mean a steep downward price move in the event they liquidate their long positions.
Please find the updated Drillinginfo charts on the link below:
Petroleum Stocks Chart