Prices Drop Further After A Large Crude Inventory Build

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byEnverus

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US crude oil stocks posted an increase of 13.8 MMBbl. Gasoline inventories increased by 7.5 MMBbl and distillate inventories decreased by 2.2 MMBbl. Yesterday afternoon, API reported a large crude oil build of 10.5 MMBbl alongside a gasoline build of 6.1 MMBbl and a distillate draw of 4.5 MMBbl. Analysts, were expecting a smaller crude oil build of 4.0 MMBbl. Total petroleum inventories posted an increase of 21.0 MMBbl.

US crude oil production remain unchanged, per EIA. Crude oil imports were down 70 MBbl/d last week, to an average of 6.0 MMBbl/d. Refinery inputs averaged 14.9 MMBbl/d (0.9 MMBbl/d less than last week’s average).

Inventory builds are finally beginning to materialize in US weekly data, and this is just the start. As refiners cut rates to operational minimums and begin to idle capacity, even more barrels are going to head into storage over the coming weeks. This sudden drop in prompt demand is having its greatest effect on sinking grades in the field, which will ultimately result in a massive culling of production by way of shut-ins. Light sweet grades with high gasoline yields are particularly at risk of being shut-in. According to a recent analysis using Enverus’ Optiflo Crude model, up to 6 MMBbl/d of light sweet crude is at risk of becoming stranded in April if average refinery utilization rates are cut to 50%. Most of those barrels are in the Permian, Bakken, and Eagle Ford.

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