Crude oil prices backed off after it appeared that President Trump backed off from war. As the blame for the weekend attacks on the Abqaiq oil-processing plant swirls and the Khurais oil field is being pointed towards Iran, the market is sensing that the response may be more muted than it feared. President Trump tweeted, "I have just instructed the Secretary of the Treasury to substantially increase sanctions on the country of Iran!". Instead of bombs, we get sanctions and a push to build a coalition in the UN.

Oil also sold off on Saudi Arabia's rosy outlook for the full return to normal operations. Yet traders are very skeptical of the rose-colored glasses they have on. The Wall Street Journal reports that the Saudis are making inquiries to import Iraqi crude and suggests they are really relying on oil in storage and not returned production to meet customer demand. The Saudis are telling us one thing but industry experts are telling us another on this. It’s not like you can just replace refinery parts overnight. They can’t just go to “Refiners are Us” or “Refinery Depot” and do a little shopping!

We also had the Energy Information Administration (EIA) status report that was bearish but not as bearish as the American Petroleum Institute (API) version. The API reported a surprise 1.1-million-barrel increase in crude supply but product builds that were much smaller than the API. The EIA reported total motor gasoline inventories increased by 0.8 million barrels. Distillate fuel inventories increased by 0.4 million barrels last week.

We saw a drop in refining activity as we may be seeing maintenance as well as operations. The EIA said that "U.S. crude oil refinery inputs averaged 16.7 million barrels per day during the week ending September 13, 2019, which was 788,000 barrels per day less than the previous week’s average. Refineries operated at 91.2% of their operable capacity last week. Gasoline production decreased last week, averaging 9.5 million barrels per day. Distillate fuel production decreased last week, averaging 5.1 million barrels per day. U.S. crude oil imports averaged 7.1 million barrels per day last week, up by 326,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.7 million barrels per day, 13.7% less than the same four-week period”.