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WTI/RBOB Jump On Largest Crude Draw In 2017 Offset By Major Product Build, Rising Production

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WTI/RBOB prices were at the lows of the day after last night’s huge surprise inventory data from API, but kneejerked higher after DOE reported a surprisingly large crude draw (the biggest since Dec 2016. However, it’s clear that refineries are on fire as gasoline and distillates inventories surged by the most in at least 3 months. US crude production rose once again to its highest since August 2015.

API

  • Crude +897k (-1.75mm exp)
  • Cushing -1.971mm – largest since Feb 2014
  • Gasoline +4.445mm (+500k exp) – largest since Jan 2016
  • Distillates -36k

DOE

  • Crude -3.64mm (-1.75mm exp) – biggest since 2016
  • Cushing -1.203mm
  • Gasoline +3.369mm (+500k exp) – biggest in 3 months
  • Distillates +2.651mm (-1mm exp) – biggest since first week of Jan

As Bloomberg notes, the U.S. refining system is absolutely on fire: up another 347,000 barrels a day last week to 17.3 million barrels a day processing. It’s huge. And that explains the major builds in products (gasoline/distilates) and surprise draw in crude…

 

Crude stocks fell -3.6 million bbl to 529 million bbl last week, a faster draw down than normal at this time of year.

As Reuters adds, crude stocks tightened last week by about -5.7 million bbl compared with 2016 and -7.6 million bbl compared with 10-yr average

Crucially, as Bloomberg’s Javier Blas details: Saudi Arabia cutting production? Not much, if you believe the U.S. oil imports figures. Last week, the U.S. bought from the kingdom 1.19 million barrels of oil, up from 1.18 million barrels the previous week. Imports from Kuwait and Iraq also rose last week. So far, OPEC cuts are not really translating into lower U.S. imports from key players in the Middle East.

US Crude production continues to trend higher with lagged rig counts – now at the highest level since Aug 2015 (and on pace for record production levels by the end of July 2017 if this trend continues).

Prices were already retesting the post-API lows heading into the DOE priont but price for both WTI and RBOB snapped higher (despite the major build in the latter)

 

As Bloomberg’s Javier Blas notes, the market is starting to lose faith in the re-balancing story, with hard data not showing yet a significant draw in inventories (particularly of crude). In the meantime, U.S. production (weekly figures) continues to march up. In recent weeks, the EIA has pegged U.S. domestic output growing at 30,000-50,000 barrels a day and further confirmation of the growth will undermine the bulls. The chart shows a dramatic increase.



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