WTI Jumps After Biggest Crude Draw Since 2016
WTI was trading lower overnight after the bounce on API's big crude draw was eviscerated by escalating trade wars. However, when DOE reported a massive 12.63mm crude draw - the most since Sept 2016 - WTI prices spiked (after kneejerking lower first).
Bloomberg's Michael Jeffers notes that American oil stocks are now at the lowest level since February of 2015, flying in the face of bumper production. The refineries are in overdrive for this time of year, even as utilization fell slightly. Exports are still over 2 million barrels a day.
API
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Crude -6.8mm
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Cushing +1.952mm (-1.3mm exp)
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Gasoline -1.59mm
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Distillates -1.925mm
DOE
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Crude -12.63mm (-3.79mm exp) - biggest draw since Sept 2016
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Cushing -2.062mm (-1.3mm exp)
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Gasoline -694k (-1mm exp)
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Distillates +4.125mm - biggest build since Jan 2018
Following last week's surprise crude build (from DOE), API reported a much bigger than expected crude draw
Bloomberg Intelligence Energy Analyst Fernando Valle notes that exports of refined products need to rise if crack spreads are to recover from recent lows. Rising crude prices have dampened demand growth just as red-hot refinery utilization has flooded domestic markets, pushing down margins.
All eyes remain on US crude production which has now flatlined for 4 straight weeks...
Amid Permian pipeline bottlenecks.
“U.S. production is constrained because we don’t have enough pipelines coming out of the Permian,” James Williams, president of energy researcher WTRG Economics, says.
WTI prices spiked on the big crude draw from API but once trade tariff headlines hit, prices tumbled. Then when DOE printed, the machines went nuts, initially puking lower then spiking higher.
The rise in prices is caused more from the US not increasing supply than OPEC. This is caused by the distress of small US oil companies borrowing too much to ramp up production, many of which aren't very profitable today due to their debt load. US majors also ramped besides Exxon who is the big developer for the next 5 years. Despite what people say, Exxon's move is the smarter move.
For one, it has the assets to expand. For another, it can increase production at a nice profit now rather than developing and selling oil at a loss for years. And lastly, it learned that in the US you can be penalized for buying an oil asset for the future and not developing it meaning now no oil company will buy and develop assets until needed. That takes away flexibility and US consumers will pay a price at the pump for this accounting silliness.