WTI Dips After US Crude Production Rise, Inventory Build

Oil prices have been volatile so far today but are higher for now after dropping on headlines  from Bloomberg reporting that the International Energy Agency plans to deploy 60 million barrels of crude on top of the huge stockpile release already announced by the Biden Administration. Overnight saw dismal data from China which reinforced demand anxiety.

“Everything to me points to the market being in a pretty difficult place on the supply side,” said Callum MacPherson, head of commodities at Investec Plc.

“The main bearish point I can see is the China Covid outbreak, everything else looks pretty bullish.”

For now, all eyes on US gasoline demand for any signs of demand destruction…

API

Crude +1.08mm (-2.056mm exp)

Cushing +1.791mm

Gasoline -543k

Distillates +593k

DOE

Crude +2.42mm (-2.056mm exp)

Cushing +1.651mm

Gasoline -2.041mm

Distillates +771k

The official DOE data confirmed API’s reported build in crude stocks and a sizable rebound in stocks at Cushing…

Source: Bloomberg

The headline build in crude stockpiles was more than offset by the withdrawal of more than 3.7 million barrels of crude from the Strategic Petroleum Reserve last week. Total nationwide crude inventories (including commercial stockpiles and oil held in the SPR) fell by 1.3 million barrels in the week to April 1. That’s 30 straight weeks of crude draws from the SPR and there’s going to be many more of them to come.

Source: Bloomberg

Total oil product demand slipped again and stands at the lowest since November. Looking at the four-week average, it’s just below where it was at this time of year in 2019.

Crude inventories at Cushing rose after falling the week prior. Volumes at the depot, the largest in the U.S., are at the highest since early February.

Source: Bloomberg

Gasoline demand rebounded modestly last week but remains significantly below average…

Source: Bloomberg

US crude production rose for the second straight week, back to its highest since May 2020…

Source: Bloomberg

East Coast diesel inventories fell to their lowest levels since 2003 at 27.3mn bbl and East Coast jet fuel inventories drew down to their lowest seasonal level since 1996.

Source: Bloomberg

WTI was hovering around $102.50 ahead of the official data and dipped on the bigger than expected build…

As Bloomberg notes, the possibility of new curbs is offsetting the impact in the global crude market of a vast release from the U.S. Strategic Petroleum Reserves (SPR,) beginning in May, in a bid to tame prices. Other countries have said they’ll also make drawdowns.

“Many who were long oil got out in the last week or so on the basis that the SPR was just too much for the market to handle without some real evidence of dropping Russian crude exports,” said Scott Shelton, an energy specialist at TP ICAP Group Plc.

That move has reshaped the oil futures curve, keeping a lid on nearby prices but lifting those further into the future.

But who cares about that… it’s after the Midterms! (and the next government will have to deal with the cost of refilling it at higher prices?)