Despite the 0.6 MMBbl draw in Cushing versus the prior reported week, total US crude oil stocks increased by 1.1 MMBbl. Gasoline and distillate inventories increased 0.8 MMBbl and 0.4 MMBbl, respectively. Yesterday afternoon, API reported a crude oil build of 0.6 MMBbl, alongside gasoline and distillate builds of 1.6 MMBbl and 2.0 MMBbl, respectively. Analysts, to the contrary, were expecting a crude oil draw of 2.9 MMBbl. Total petroleum inventories posted an increase of 0.9 MMBbl. For a summary of the crude oil and petroleum product stock movements, see the table below.
US crude oil production remained unchanged last week, per the EIA’s estimates. Crude oil imports were up 0.3 MMBbl/d last week, to an average of 7.1 MMBbl/d. Refinery inputs averaged 16.7 MMBbl/d (0.8 MMBbl/d less than last week’s average), leading to a utilization rate of 91.2%. The price decline that started yesterday on hopes that Saudi Arabian production would be restored by the end of the month continued today, with the build in crude oil stocks. Prompt-month WTI was trading down $1.06/Bbl, at $58.28/Bbl, at the time of writing.
Flat price has been volatile following the attack on Saudi Arabian crude facilities over the weekend, with West Texas Intermediate rallying nearly 15% on Monday. The attack on Saudi Aramco’s crude processing facility at Abqaiq and the Khurais oil field caused output to fall by nearly 5.7 MMBbl/d. The Saudis have since pledged to fulfill their export commitments by drawing down inventories and aims to fully restore production to pre-attack levels by the end of the month. Prices have subsequently slumped.
Although prices gave up some of their gains, the possibility of tensions further escalation of tensions remains. The uncertainty around how Saudi Arabia’s response to the attack and what the US involvement will likely leave a geopolitical risk premium in the market even after Saudi production is fully restored. Given the poor performance of the kingdom’s air defenses over the weekend, there is also no guarantee that Saudi Arabia would be able to stop another attack if one were to occur. Any further attacks on Saudi Arabia’s infrastructure, escalating tensions in the region or news of Saudi Arabia delaying the full restoration of production will likely cause WTI to challenge the $63.80/bbl area up to $66/bbl, which established the highs from last spring.