US crude oil stocks increased by 0.9 MMBbl last week, while gasoline and distillate inventories reported withdrawals of 3.7 MMBbl and 2.5 MMBbl respectively. Yesterday afternoon, API had reported a crude oil build of 1.9 MMBbl, while reporting gasoline and distillate withdrawals of 1.1 MMBbl and 2.0 MMBbl respectively. Analysts had expected a crude oil build of 2.0 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a decrease of 3.9 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 18 MBbl/d from last week per EIA’s estimate. Imports were down 83 MBbl/d last week to an average of 8.2 MMBbl/d. Refinery inputs averaged 16.2 MMBbl/d (425 MBbl/d more than last week), leading to a utilization rate of 89.3%. The petroleum stocks report is bullish, due to the total petroleum products withdrawal and less than anticipated crude oil inventory build. WTI prices are up $0.70/Bbl, trading at $49.08/Bbl at the time of writing.
WTI prices have been trading in the $47-48/Bbl range over the last week. Prices increased Tuesday, prompted by the supply disruptions in Libya and continued to climb on Wednesday after a bullish report by the EIA. Libya stated production at the western Libyan fields of Sharara and Wafa have been blocked by armed factions, reducing output by 252 MBbl/d.
On Sunday, a committee from quota carrying OPEC and non-OPEC countries met to discuss compliance with production cuts. Prices went down after the meeting due to the lack of any solid statement regarding the extension of the cuts. OPEC has been reiterating that they will be extending the cuts beyond June. However, the non-OPEC compliance (only 44% in February) allows for market uncertainty if the extended cuts can have a significant impact in reducing the global supply overhang. Any gains in prices are being capped with the increasing U.S activity-production and record levels of inventories. Libyan news along with the willingness of OPEC extending cuts may bring some bullish sentiment to the market. However, it is important to note that Libyan outages may not last long enough to make a significant impact, and an additional 600 MBbl/d from Es Sider and Ras Lanuf can be brought on-line if the nation can regain control of these ports.
Major doubts on extended production cuts, historically high inventory levels, and U.S producers continuously increasing their activity will continue to keep 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
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