US crude oil stocks increased by 8.2 MMBbl last week. Gasoline and distillate inventories decreased by 6.6 MMBbl and 2.7 MMBbl respectively. Yesterday afternoon, API had reported a crude oil build of 11.6 MMBbl, while reporting gasoline and distillate withdrawals of 5.0 MMBbl and 2.9 MMBbl respectively. Analysts had expected a crude oil build of 1.6 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a decrease of 2.4 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 56 MBbl/d from last week per EIA’s estimate. Imports were up 561 MBbl/d last week to an average of 8.2 MMBbl/d. Refinery inputs averaged 15.5 MMBbl/d (172 MBbl/d less than last week), leading to a utilization rate of 85.9%. Although the total petroleum products withdrawal could be interpreted as bullish, the higher than anticipated crude oil inventory build and estimates of growing US production are interpreted as bearish. WTI prices are down $0.92/Bbl, trading at $52.22/Bbl at the time of writing.
WTI prices continue trading range-bound. Saudi Arabia’s oil minister said on Tuesday at CERAWeek that OPEC and non-OPEC efforts had done much to improve market fundamentals. However, he pointed out that the success of the cuts has come at the expense of Saudi Arabia subsidizing overproduction by other quota carrying members like Iraq. The current supply deficit is around 650 MBbl/d, which is not enough to normalize inventories back to levels from prior to the price crash by the end of the year. At the very least, OPEC would need to extend their cuts past the initially agreed upon six months. The group is expected to make any decisions to extend or deepen the cuts in their May meeting. A lack of Russian compliance has also come to the forefront this week, as their cuts remain short of promised levels. Libyan unrest has been the only new bullish news in the market this week. Given the fundamental situation, the expectations for higher prices in the near future are quickly deteriorating. The speculative length in the market remains concerning, as a move to liquidate this position may lead to prices testing the lower end of the tight $50-$55/Bbl WTI price range that has persisted for the last couple of months.
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Petroleum Stocks Chart