US crude oil stocks increased by 5.0 MMBbl last week, while gasoline and distillate inventories reported withdrawals of 2.8 MMBbl and 1.9 MMBbl respectively. Yesterday afternoon, API had reported a crude oil build of 4.5 MMBbl, while reporting gasoline and distillate withdrawals of 4.9 MMBbl and 0.9 MMBbl respectively. 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 1.3 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 20 MBbl/d from last week per EIA’s estimate (all from lower 48). Imports were up 902 MBbl/d last week to an average of 8.3 MMBbl/d. Refinery inputs averaged 15.8 MMBbl/d (329 MBbl/d more than last week), leading to a utilization rate of 87.4%. The petroleum stocks report is bearish, due to builds in crude and total petroleum inventories. WTI prices are down $0.80/Bbl, trading at $47.44/Bbl at the time of writing.
WTI prices have been trading in the $47-49/Bbl range over the last week, while prices slipped to an almost four-month low this morning after the EIA report. Prices have been on a bearish trend despite the supply cuts, IEA’s revised demand numbers (higher), and OPEC hinting they are willing to extend the supply cuts.
The market has completely ignored the indications that OPEC is increasingly favoring extending the production cuts, bearing in mind the lack of support from Russia and non-OPEC members as they have yet to deliver fully on the existing reductions. So far, Saudi Arabia has been the only country with significant compliance levels. Emirates, Kuwait, Venezuela and Algeria has been showing 50-60% compliance, while Russia only cut 118 MBbl/d from an agreed level of 300 MBbl/d. In the meantime, Iran has been pumping at record levels and increasing output to multi-year highs. Exports from Iran in February reached 3.0 MMBbl/d, a level not seen since 1979. According to IEA, Iraq and Iran will continue to increase output to 5.4 MMBbl/d and 4.15 MMBbl/d respectively by 2022. Libya’s national oil company stated they are confident of regaining control of two key oil ports, Es Sider and Ras Lanuf, which have a combined export capacity of 600 MBbl/d; adding more bearish sentiment to market.
Major doubts on extended production cuts, historically high inventory levels, and U.S producers continuously increasing their activity will keep the pressure on prices. Drillinginfo expects the low range to form around the lows of Nov. 2016, prior to the OPEC cuts of $44.82/Bbl, while the high side of the range being $50/Bbl as rallies expected to be sold at this level while the market settles on its new trading range.
Please find the updated Drillinginfo charts on the link below:
Petroleum Stocks Chart