WTI Spikes After Huge Inventory Draws

WTI’s post-API surprise crude draw rally stuttered this morning as uncertainty over the status of trade negotiations between the U.S. and China stoked concerns over global economic growth.

“The energy complex is on the back foot as it takes its cues from a pullback on global stock markets,” Stephen Brennock and Tamas Varga, analysts at PVM Oil Associates Ltd., wrote in a report.

“This is in spite of a bullish API report.”

API

• Crude -2.133mm (+1.75mm exp)

• Cushing -317k

• Gasoline -2.794mm

• Distillates -1.607mm

DOE

• Crude -9.59mm (+1.75mm exp, Whisper +66k) - biggest since July 2018

• Cushing -468k

• Gasoline -4.587mm

• Distillates -4.127mm - biggest since Dec 2018

After last week's broad-based inventory declines, expectations were for a rebound build this week (API, however, reported a surprise draw). But DOE reported a massive crude draw (9.59mm barrels), the biggest since July 2018, along with draws in products and at Cushing.

 

Crude inventories in Europe’s Amsterdam-Rotterdam-Antwerp region fell by 1.2 percent last week, Genscape data show.

Bloomberg notes that Crude unit outages at refineries are set to be significantly higher for the rest of March than they were in the last two years. That should help to further whittle down gasoline inventories, which are still well above the seasonal average.

Crude Production rose modestly on the week but looks set to slow as US rig counts fall notably...

 

WTI tested below $59 this morning but rebounded ahead of the DOE data, and spiked on the huge crude draw...

 

Finally, Bloomberg Intelligence Energy Analyst Fernando Valle notes that the massive 9.6 million-barrel drop in crude bodes well for prices, particularly as refinery utilization continues to ramp up. The recovery in distillate demand shows that the U.S. economy is not slowing down in the short term, despite headwinds from trade. The large declines in gasoline and diesel stockpiles should help crack spreads, but the slowdown in exports for both fuels is a reason to worry about next week's numbers.