WTI/RBOB prices held gains from last night's smaller-than-expected crude build from API, but prices action was mixed after DOE reported a bigger than expected crude build and bigger than expected gasoline draw (as production hit a new record high).

Bloomberg Intelligence's Valle notes that maintenance season for refiners will deplete gasoline inventories over the coming weeks as the plants open space for summer components. Despite an improving outlook for demand, crack spreads haven't meaningfully recovered after falling more than $1.20 a barrel over the past month, though they may recoup some of their losses in coming weeks. Demand is up 3% in 2018 vs. the five-year average.

“The oil market is more fragile than it seems,” said Norbert Ruecker, head of commodity research at Julius Baer Group Ltd. in Zurich. “Demand growth is strong, but supply is catching up.”

API

• Crude +1.156mm (+2.5mm exp)

• Cushing -155k (unch exp)

• Gasoline -1.262mm

• Distillates -4.258mm - biggest draw since Oct 2017

DOE

• Crude +5.022mm (+2.25mm exp)

• Cushing +338k (unch exp) - first build since Dec 2017

• Gasoline -6.27mm - biggest draw since Sept 2017

• Distillates -4.36mm - biggest draw since Oct 2017

Some stunning numbers here with a much bigger than expected crude build as products saw a huge draw (and Cushing stocks actually increased for the first time this year)...

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Blomberg does have one major concern. Javier Blas issues a "statistical warning"... The EIA is again running a huge adjustment factor to hammer down its supply, demand, and stocks balance sheet into place. The adjustment was last week positive to the tune of 605,000 b/d (the only second time in 10 years the adjustment factor is positive by more than 600,000 b/d). The previous week, the adjustment was -570,000 b/d.

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Once again, all eyes are on US Crude production - especially following OPEC's comments this morning (via Bloomberg):

OPEC for the first time is forecasting that new oil supplies from its rivals will exceed growth in demand this year as the U.S. industry thrives.

The Organization of Petroleum Exporting Countries raised its expectation for supply growth from the U.S. and other producers for a fourth consecutive month, according to its monthly market report. The outlook suggests efforts by the group and Russia to clear a global glut by cutting supply are backfiring, as new production emerges, particularly in the U.S.

And expectations were for a 20K uptick in Lower 48 production but aggregate US oil production rose 12k b/d to a new record high..

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The kneejerk reaction to the DOE sent WTI/RBOB and Energy stocks higher BUT once the large crude build and production were noted, prices began to sink quickly...

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“The oil market is looking increasingly oversupplied,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.“Risk is currently skewed to the downside.”