US crude oil stocks decreased by 2.2 MMBbl last week, while gasoline and distillate inventories posted withdrawals of 3.0 MMBbl and 2.2 MMBbl respectively. Yesterday afternoon, API had reported a crude oil withdrawal of 1.3 MMBbl, alongside gasoline and distillate withdrawals of 3.7 MMBbl and 1.6 MMBbl respectively. Analysts had expected a slight crude oil build of 87 MBbl. The most important number to keep an eye on, total petroleum inventories, posted a withdrawal of 4.7 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 36 MBbl/d from last week per EIA’s estimate. Imports were up 28 MBbl/d last week to an average of 7.9 MMBbl/d. Refinery inputs averaged 16.7 MMBbl/d (268 MBbl/d more than last week), leading to a utilization rate of 91.0%. The petroleum stocks report is bullish, due to the higher than expected withdrawal in crude oil and the total petroleum inventories withdrawal. WTI prices are still trading down slightly despite the bullish report, down only $0.03/Bbl to $53.37/Bbl at the time of writing.
WTI prices have been trading up recently, with the most recent factor being news that Saudi Arabia wants to extend quotas for an additional six months when the group meets again in May. The strikes against Syria have also heightened geopolitical tensions in the Middle East, leading to higher prices. Recent outages in Libya and the North Sea have also lent support to prices recently. However, the rising US rig count and production along with the stubbornly high crude oil and petroleum product inventories globally continue to keep a lid on potential price increases. Until inventories can be normalized to levels from prior to the price crash, prices can’t rise sustainably. For inventories to normalize, OPEC must extend quotas and keep high compliance levels and demand must rise by the 1.34 MMBbl/d expected by the IEA. Unless both of these occur concurrently, inventories will remain higher than normal levels, keeping prices from rising to $60/Bbl next year. Drillinginfo believes that the low end of the new range still remains at $47.00/Bbl, having tested that level multiple times and failing to break below. Recent price action has developed the high end of the new range at the mid-$53/Bbl level. Expect any price increases to be sold in hedging activities by producers. Additionally, the gains have left prices approaching over bought levels, so slight corrections should be expected.
Please find the updated Drillinginfo charts on the link below:
Petroleum Stocks Chart