A Bad Day for Bulls as Iran Stands Down and US Inventories Explode



US crude oil stocks posted an increase of 1.2 MMBbl. Gasoline and distillate inventories increased 9.1 MMBbl and 5.3 MMBbl, respectively. Yesterday afternoon, API reported a crude oil draw of 5.95 MMBbl alongside large gasoline and distillate builds of 6.7 MMBbl and 6.4 MMBbl, respectively. Analysts were expecting a smaller crude oil draw of 3.6 MMBbl. Total petroleum inventories posted a very large increase of 14.8 MMBbl.

US crude oil production remained unchanged last week, per EIA. Crude oil imports were up 0.38 MMBbl/d last week to an average of 6.7 MMBbl/d. Refinery inputs averaged 16.9 MMBbl/d (0.39 MMBbl/d less than last week’s average).

Crude oil futures spiked yesterday evening as initial news broke of the Iranian ballistic missile attack against two bases hosting US military personnel in Iraq. Iran carried out the attack in retaliation for last Friday’s killing of Maj. Gen Qasem Soleiman, but the attack did not result in any US or Iraqi casualties.  The lack of casualties is believed to have been intentional, with the attack largely serving as a face-saving measure for Iran’s domestic audience while also providing an offramp to allow for de-escalation of tensions with the United States. Iran even gave Iraq’s prime minister advance warning of the attacks, likely with the understanding that he would then pass word to the United States. In his address to the nation this morning, President Donald Trump stated that he did not seek war with Iran, but stressed his Administration’s resolve in the face of any future hostile actions by Iran. Crude futures are down versus yesterday’s close and continue to fall. Given the quick unwinding of geopolitical risks to supply and today’s bearish inventory report, prices are likely to settle sharply lower.

Petroleum Stocks Chart




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