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WTI/RBOB Sink As Inventory Draws Disappoint

WTI/RBOB held on to gains overnight following major draws reported by API and more OPEC jawboning (this time from UAE), but the DOE data disappointed compared to API's huge draws with Crude and Gasoline drawing down but considerably less than API reported (and Distillates barely drawing down at all).

Bloomberg Intelligence energy analyst Fernando Valle:

Strong demand continues to spur inventory drains. Crude-oil stocks remain elevated, but refined-product inventories are looking increasingly tight.

 

Wide WTI discounts to Brent are likely to push inventories down in coming weeks, driven by exports and increased refinery utilization.

 

Crack spreads are likely to stay elevated, in particular for gasoline, as demand continues to buck the seasonal trend.

API

  • Crude -5.087mm (-1.3mm exp)
  • Cushing -263k
  • Gasoline -7.697mm (-1.55mm exp)
  • Distillates -3.106mm

DOE

  • Crude -2.44mm (-1.3mm exp)
  • Cushing +90k
  • Gasoline -4.02mm (-1.55mm exp)
  • Distillates -320k (-2.5mm exp)

Following API's major draws, DOE was a big disappointment with smaller draws in crude, gasoline, and distillates than API reported and a build at Cushing...

Bloomberg Intelligence energy analysts Fernando Valle and Vince Piazza note that it's the time of year when oil inventories begin to build, and supplies are already almost 17% above the five-year norm. While benchmarks have rallied on heightened geopolitical concerns, sentiment remains unsteady. Oil production is resilient, but exports are offering a key outlet for elevated stockpiles.

Overall crude inventories are at their lowest since May 2015...

Distillates and Gasoline exports jumped last week. US crude, products imports sunk a new record low as total crude/product exports hit a new record high.

US Crude production rebounded the prior week from Gulf storm shut-ins and increased ionce again this week...

WTI/RBOB held gains from last night's API data into the DOE print, then sank as DOE disappointed...

“If trading behavior in the last few days and weeks gives any indication, prices will rise further on just confirmation of strong inventory draws,” explained Commerzbank analyst Carsten Fritsch, adding “we are close to the 2017 high from January and if that is broken then we are at more than 2-year highs. This will give further incentive for U.S. oil producers to increase output so I think we are setting the base for lower prices for next year.”