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WTI Pops'n'Drops As Inventory Draws Battle Surging Production

WTI prices kneejerked higher after last night's yuge crude inventory draw reported by API but prices have leaked lower into the DOE print. Expectations were for a 4th straight weekly draw in crude (thanks to robust refining activity) were confirmed with a 7.2mm inventory drop (less than API's 10.2mm), and Gasoline also saw a major draw (as opposed to API's build). However, exuberance in WTI is not evident as Lower 48 production surge above 9mm barrels for the first time since July 2015.

API

  • Crude -10.2mm (-3mm exp) - biggest draw since Sept 2016
  • Cushing  -2.568mm (-1mm exp)
  • Gasoline  +1.9mm (-1.8mm exp)
  • Distillates -111k

DOE

  • Crude -7.2mm (-3mm exp)
  • Cushing -1.699mm (-1mm exp)
  • Gasoline -4.445mm  (-1.8mm exp)
  • Distillates -1.185mm

While everyone was exuberant about API's crude draw the gasoline was notable, but DOE data dismissed that with draws across the entire complex...Refiners kept up at a seasonal record pace, using 17.6 milion barrels of crude and feedstocks. That's way above previous years. The peak season should last another month or so, before plants start to shut units for maintenance.

Bloomberg's David Marino notes that for a second week, no oil came out of the Strategic Petroleum Reserve, according to the Energy Department, after about 16 million barrels hit the market since early March. Without that buffer, U.S. commercial stockpiles would likely have drawn down even quicker.

The glut is shrinking: Total petroleum inventories (excluding the SPR) are down about 37 million barrels in the past month to the lowest since early 2016.

But net imports continue to trend lower (unseasonally)

For the bulls, Bloomberg's Javier Blas notes that the good news is that oil inventories decreased across the board; the bad news is that shipments from Saudi Arabia rebounded considerably last week. Riyadh shipped 932,000 barrels a day to the U.S., up from a 7-year low of 524,000 barrels a day two weeks ago. Shipments from Iraq were also very strong, although Kuwait sent far less crude into the U.S.

Production has trended higher with rig counts for months. Crude production slipped a bit last week, but that's due to a drop in Alaska output, as Lower 48 output topped 9mm barrels last week for the first time since July 2015...

 

Crude has surged to 2-month highs on the back of the recent trend of inventory draws but are "faced with very strong pivotal resistance" in the middle of notable support/resistance at the 50DMA (46.52), 100DMA (48.22) and 200DMA (49.43)...

 

Well that didn't last long...