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WTI Jumps Back Above $47 After Crude Draw; Production At Highest Since July 2015

After API's surprise crude build, DOE dashed bears' hopes with a bigger than expected crude draw (-4.727mm vs -3.5mm exp) as the entire energy complex was inventoires decline. WTI prices kneejerked back above $47 on the proint but stalled a little as once again production jumped (to its highest since July 2015).

 

API

  • Crude +1.628mm (-3.5mm exp)
  • Cushing +608k
  • Gasoline -5.448mm (-1.3mm exp)
  • Distillates -2.888mm

DOE

  • Crude -4.727mm (-3.5mm exp)
  • Cushing -23k
  • Gasoline -4.445mm (-1.3mm exp)
  • Distillates -21.37mm (+1.2mm exp)

Amid peak demand season, the large gasoline draws are unsurprising but the bid crude draw (especialy compared to API's build) was a bullish surprise...

The latest 4.7mmbbl draw dragged down commercial stocks to 491 million, approaching the top end of the historical range.

With the latest draw, YTD crude stocks are now just 1.1mm barrels above 2016 levels, although as Reuters notes, still 154MM bbl above the 10Year average:

From the start of the year, commercial stocks are up 11 mm bbls, compared to a 38mm bbl increase in 2016, 81mm in 2015 and +29mm in the last 10 years.

Meanwhile, total imports rebounded from last week's 7.6mm bbls to 8.0mm in the latest week.

Overall, much is being made of the notable decline in US stockpiles since its peak in late March, however, as the chart below shows, US Crude stockpiles remain 37% above historical average...

Of course, last week it was the resurgence in US crude production that stymied bullish exuberance at inventory draws. After rebounding last week, it looks like the Alaskan component of US oil production slowed this week as maintenance work continues in the Alaskan North Slope, but the Lower 48 saw production hit 2 year highs...

 

And demand slumped...just when seasonally it should be surging

The crude draw last night sent prices kneejerking lower but WTI has leaked higher overnight, testing $47 once again prior to the DOE data. As the data hit, machines ran stops and burst WTI through $47...

But the biggest highlight of the report, at least according to Bloomberg, is the collapse in Saudi shipments into the U.S., with last week arrivals at a 7-year low of just 524,000 barrels a day, down from 851,000 the previous week.  That's the lowest weekly U.S. imports from Saudi since June 2010.

"Riyadh has promised to cut supplies this summer to the market that traders care the most (and where the data is most visible) and it seems to be delivering. If the trend holds, it could put upward pressure on prices... Saudi oil minister Khalid Al-Falih promised big cuts and he's delivering."