WTI Bounces But Inventory Builds Spark "Glut Alarm Bells"

WTI has extended losses following last night's broad inventory builds reported by API, briefly dropping to a $52 handle.

“The API set a bearish tone after reporting builds across the board,” PVM Oil Associates analysts including Stephen Brennock wrote in a report.

“All in all, these figures will do little to silence the U.S. glut alarm bells,” Brennock said in a separate note.

Bloomberg Intelligence's Senior Energy Analyst Vince Piazza noted that turmoil in Venezuela is behind the recovery in WTI prices after a December swoon in a crude market driven by geopolitics. We remain skeptical, based on a recent drop in Asian demand and concern that trade tensions will slow growth in developed economies. U.S. termination of waivers for sanctioned Iranian barrels this year is a key risk for balances. Resilient domestic production and a healthy backlog of almost 8,600 uncompleted wells informs our more cautious stance.

API

  • Crude +2.514mm (+1.5mm exp)
  • Cushing +889k (+400k exp)
  • Gasoline +1.731mm (+1.5mm exp)
  • Distillates +1.141mm (-2mm exp)

DOE

  • Crude +1.263mm (+1.85mm exp)
  • Cushing +1.441mm (+400k exp)
  • Gasoline +513k (+1.5mm exp)
  • Distillates -2.257mm (-2mm exp)

With refinery maintenance season perhaps upon us, crude inventories rose for the 3rd week in a row (and gasoline stocks also rebounded)...

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Production continues to hold at record highs...

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“Last week’s really low import numbers are probably not going to be repeated--we are probably going to revert to the mean", says Sam Margolin, an energy analyst at Wolfe Research

WTI tumbled to a $52 handle overnight after the API data bounced, then fell once again as the dollar strengthened. Prices knee-jerked higher on the smaller than expected crude build...but remain lower on the day.

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