US crude oil stocks increased by 1.6 MMBbl last week, while gasoline and distillate inventories posted withdrawals of 0.6 MMBbl and 0.5 MMBbl respectively. Yesterday afternoon, API had reported a crude oil withdrawal of 1.83 MMBbl, alongside gasoline and distillate withdrawals of 2.6 MMBbl and 2.1 MMBbl respectively. Analysts had expected a crude oil withdrawal of 0.2 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a build of 1.0 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 52 MBbl/d from last week per EIA’s estimate. Imports were down 374 MBbl/d last week to an average of 7.9 MMBbl/d. Refinery inputs averaged 16.4 MMBbl/d (203 MBbl/d more than last week), leading to a utilization rate of 90.8%. The petroleum stocks report is bearish, due to the unexpected rise in crude oil stocks and the overall build in crude and total petroleum inventories. WTI prices have pared gains since the report, but are trading up $0.15/Bbl, trading at $51.16/Bbl at the time of writing on bullish outage news and hopes of a quota extension.
WTI prices have been trading up recently, with prices up on outages in Libya and the North Sea and growing optimism regarding the prospects for an extension of the OPEC quotas. An unexpected outage at the Buzzard oil field has taken approximately 180 MBbl/d offline after production halted as repair work is being undertaken. The Buzzard stream is the largest contributor to the Forties stream, which underlies the Brent benchmark. Libya’s El Sharara field is back to producing 200 MBbl/d after operations restarted on April 2. The El Sharara field has a capacity of 350 MBbl/d and was producing only 80 MBbl/d for a while before operations restarted. Several OPEC and non-OPEC members have voiced their wishes to extend the quotas past the originally agreed upon six months on the heels of more promising data regarding compliance. Reuters data last week confirmed that March compliance was above levels seen in February. OPEC is due to release its monthly report on April 12 and the IEA’s will follow on April 13. These reports will give the market more information about the current supply/demand balance and compliance estimates. For a longer-term sustainable recovery of prices, OPEC has to extend production cuts, keep up high compliance levels, and demand has to grow at least at the 1.34 MMBbl/d levels forecasted by the IEA. Only under these conditions can the extremely high levels of inventories be normalized to levels from prior to the price crash. While Drillinginfo continues to expect prices to test lower levels in the long term, the market has now clearly defined the low end of the new range at $47.00/Bbl, having tested that level for three consecutive weeks and failing to break below. Expect price action in the coming week to develop the high end of the new range.
Please find the updated Drillinginfo charts on the link below:
Petroleum Stocks Chart