Oil prices are surging higher this morning, erasing overnight losses, despite OPEC+ hiking output (celebrated by The White House) as the 'hope' that the rumors around Russian exemptions from the last couple of days might lead to an OPEC breakup have been smashed on the shores of reality. It appears the Saudis promised just enough to offer an olive branch for Biden ahead of his visit to The Kingdom but not enough to prompt any impact on the global supply tightness.

“This is a pretty minor tweak, but it is a nod toward looming tight balances later this year when the EU sanctions on Russia start having an impact,” said Bill Farren-Price, a director at Enverus Intelligence Research.

“The question is whether there is any more in the OPEC tank?”

Additionally, as Bloomberg reports, the output increase will be divided proportionally between members in the usual way. Countries that have been unable to raise production, such as Angola, Nigeria, and most recently Russia, would still be allocated a higher quota. That could mean that the actual supply boost is smaller than the official figure, as has often been the case in recent months.

For now, all eyes are on gasoline data for any signs of demand destruction

API

• Crude -1.181mm (-67k exp)
• Cushing +177k
• Gasoline -256k
• Distillates +858k

DOE

• Crude -5.068mm
• Cushing +245k
• Gasoline -711k
• Distillates -529k

The official DOE data showed crude stocks plunged far more than API reported, drawing down 5.07mm barrels last week...

Source: Bloomberg

The headline draw in crude stockpiles of 5.4 million barrels was boosted by the withdrawal of more than 5 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 10.5 million barrels in the week to May 27.

Source: Bloomberg

East Coast distillates inventories fell to a record low of 20.97 million barrels last week.

The region will start to see more pipeline deliveries off the Colonial soon, but in the meantime, robust demand is draining tanks.

The US exported more oil (including crude and refined products) than it imported last week. That’s the 12th straight week that outflows have exceeded inflows. That 12-week run equals the longest period for which the US has exported more than it imported since the crude export ban was lifted by President Barack Obama.

Source: Bloomberg

There are no signs of any demand destruction in the gasoline demand data...

Source: Bloomberg

US Crude production held at 11.9mm, its cycle highs...

Source: Bloomberg

Refinery utilization in the US fell last week mainly due to a decline in runs on the Gulf Coast. The culprit is probably Exxon Baton Rouge, which had a steam loss during most of last week. The outage took down three crude units with combined capacity of 314,000 barrels a day.

The Strategic Petroleum Reserve is at its lowest level since 1987 as prices soar toward record highs...

Source: Bloomberg

WTI was trading around $114.50 ahead of the official data and pushed back up towards $116...

Finally, as we noted previously, the 3-2-1 crack, which approximates turning crude into gasoline and diesel, soared to a new record high of $55.26 today...

As Bloomberg's Javier Blas noted earlier this suggests the refined products markets continue to lead (where's the demand destruction?), encouraging higher refinery runs.

Additionally, Dennis Kissler, senior vice president of trading at BOK Financial said that “the fuel fundamentals of diesel and gasoline is whats going to keep crude supported at least into the driving season of July and that’s the major catalyst for crude."

Not good news for Mr.Biden.