WTI/RBOB Steady Despite Huge Gasoline Build, New Crude Production Record

Despite last night"s surprisingly large API-reported crude draw, WTI/RBOB prices were sliding in early trading but as the DOE data printed prices stabilized despite a smaller crude draw than API and a much bigger gasoline builds than expected. Production surged on the week to a new record high.

Bloomberg"s Mitch Martin noted that the Brent pipeline leak and another in Canada have U.S. refineries running hard to capture the widening crude differentials. That"s leading to oversupply in the gasoline market, which has seen inventories build for three straight weeks; a fourth is expected, increasing supply by 1.8 million barrels. Distillates also are expected to build, rising 1.1 million barrels, even as crack spreads recovered to more than $20 a barrel.

API

• Crude -7.382mm (-2.89mm exp) - biggest draw in 4 months


• Cushing -2.704mm (-2.5mm exp)


• Gasoline +2.334mm


• Distillates +1.5384mm

“We’re seeing U.S. inventories really continue to fall,” Phil Flynn, senior market analyst at Price Futures Group, says. Investors will focus on whether we see large builds in gasoline and distillates, which may hold back crude from rallying strongly, “but I don’t think you can underestimate the strong demand from the refiners.”

DOE

• Crude -5.12mm (-2.89mm exp)


• Cushing (-2.5mm exp) - biggest draw since Sept 09


• Gasoline +5.66mm (+2.3mm exp)


• Distillates -1.37mm (+1.2mm exp)

A 5th weekly build in gasoline inventories (much larger than expected), and unexpected distillates draw, as crude (and Cushing) stocks are reduced...

As Bloomberg notes, crude production topped 9.7 million barrels a day in last week"s data for the first time since weekly records began in 1983. Even more importantly, the EIA"s monthly assessment of crude production - seen as more accurate than the weekly figures - caught up with the more frequent data in September, after lagging for the previous 5 months.

The last week saw another surge to record highs...

 

WTI/RBOB prices extended yesterday"s losses ahead of the DOE data (despite API"s big crude draw) but the algos managed gains after the print even as crude drew less than API and gasoline"s build build...

WTI/RBOB Extend Losses On Biggest Gasoline Build In 11 Months, Record Crude Production

Following last night"s API-reported huge product inventory builds, bulls were hoping DOE would rescue WTI/RBOB prices but it did not as the dat confirmed a huge crude draw and even bigger product build (gasoline"s biggest weekly build since January). Adding to the pain, US crude production rose to another new record.

A gasoline build is likely as “refineries have been running very high, so it’s pretty natural,” James Williams, president of energy researcher WTRG Economics, says, adding that investors will also look to see the magnitude of a potential drop at Cushing.

API

• Crude -5.48mm (-2.5mm exp)


• Cushing -1.95mm (-2.4mm exp)


• Gasoline +9.196mm - biggest build since Jan 2016


• Distillates +4.259mm - biggest build since Jul 2017

DOE

• Crude -5.61mm (-2.5mm exp)


• Cushing -2.753mm (-2.4mm exp)


• Gasoline +6.78mm (+2.56mm exp) - biggest build since Jan 2017


• Distillates +1.667mm

Confirming API"s data, DOE showed a major crude draw, big drop at Cushing but major builds in products...

 

US Crude production rose 25k b/d to a new record high...

 

And WTI/RBOB prices were unable to bounce...

WTI/RBOB Spike On OPEC Headlines After Bearish Inventory/Production Data

Update: WTI/RBOB was fading after DOE data but then Kuwait dropped the following meaningless headline: OPEC JMMC RECOMMENDS EXTENSION, DIDN"T FINALIZE DURATION. And the algos took over...

*  *  *

Last night"s API-reported surprise crude build sparked selling that not even Russia/Saudi jawboning could rescue, but DOE data showed the exact opposite with a big crude draw and even bigger gasoline draw. Added to a new record high in US crude production and RBOB is fading and WTI is not rallying.

As Bloomberg reports, the U.S. has proven at least one thing this year with its expansion of crude and products exports: we are becoming more energy independent than ever before.

Last week net imports of all crude and refined products dipped to a new record low.

That"s coupled with record-high gasoline exports, a truly spectacular sea change in our world"s oil flows.

API

• Crude +1.82mm (-2.95mm exp)


• Cushing -3.178mm - most since Sept 2009


• Gasoline -1.529mm (+1.2mm exp)


• Distillates +2.696mm (+200k exp) - biggest since July

DOE

• Crude -3.43mm (-2.95mm exp)


• Cushing -2.914mm - biggest draw since Sept 2009


• Gasoline +3.63mm (+1.2mm exp) - biggest build since July


• Distillates  (+200k exp) - biggest buils since Jan

DOE data showed the exact reverse of API with big surprise draw in crude and build in gasoline... Additionally Cushing saw the biggest destocking since Sept 2009 last week...

US crude production rose 24k b/d - to a new record high...

Gasoline exports hit a record high...

 

WTI was lower and RBOB higher heading into the DOE data but the trend reversed after on the surprise bearish product builds...

WTI/RBOB Slide After Smaller Than Expected Crude Draw, New Record High Production

With WTI at its highest since July 2015, vol at 8mo lows, and the front-end flipped into backwardation for the first time since Nov 2014, it appears a lot of hope is priced into continued equlilibration (and OPEC). Last night"s API (crude draw) provided some more confirmation but this morning"s DOE data disappointed with a smaller than expected crude draw, and production rose once again to a new record high.

“Domestic production is going to be the big nugget that everybody will be racing to see, in terms of whether those levels continue to rise or not,” John Kilduff, a partner at Again Capital, says.

 

“They likely will, so that can be a counter-balance to the drawdown”

API

• Crude -6.356mm (-2.2mm exp) - biggest draw since August


• Cushing -1.8mm


• Gasoline +869k - surprise build


• Distillates-1.67mm

DOE

• Crude -1.86mm (-2.2mm exp)


• Cushing -1.827mm


• Gasoline +44k (+1mm exp)


• Distillates +269k

DOE disappointed expectations with a considerably smaller than expected crude draw (and well below API) and modest product builds...

As a reminder, last week saw the first rise in total inventories in 8 weeks and that held this week.

US crude production rose 13k b/d to a new record high...

 

Price-wise, WTI went into the DoE report at its highest since July 2015 (both WTI/RBOB higher after API) thanks also to the shutdown of the Keystone pipeline which tightened the market, but both WTI and RBOB slipped after the print...

 

The front-end of the WTI curve is in backwardation for the first time since Nov 2014. The move briefly put all of WTI curve through 2021 into backwardation

However, BofAML analysts including Francisco Blanch said in report, that "bloated crude oil inventories in North America likely will remain the Achilles’ heel of the oil market, negatively impacting WTI."

WTI/RBOB Slide On Surprise Build As US Crude Production Hits New Record High

WTI/RBOB extended yesterday"s IEA-driven losses after a big crude build reported overnight by API, and DOE did nothing to assuage that with a 1.85mm crude build (admittedly smaller than API"s projected 6.5mm, but notably different from the 2.4mm draw expected), Gasoline also surprised with a build and WTI/RBOB extended losses. Additionally US Crude production rose to a new record high.

Bloomberg Intelligence energy analyst Fernando Valle notes:

Weaker demand drove a negative print for crude and product stocks. Strong refinery runs and rising crude exports were not enough to offset rising U.S. crude production. This latest increase, combined with reduced demand for refined products should put a damper on the oil-price recovery.

API

• Crude +6.513mm  (-2.4mm exp) - biggest build in 9 months


• Cushing -1.803mm - biggest draw in 4 months


• Gasoline +2.399mm (-1.5mm exp) - biggest build in 3 months


• Distillates -2.527

DOE

• Crude +1.854mm (-2.4mm exp)


• Cushing -1.504mm


• Gasoline +894k (-1.5mm exp)


• Distillates -799k

DOE data confirmed API"s reported builds in crude and gasoline (and a big drawdown in Cushing stocks)

US Crude production reached a new record high the previous week - not what OPEC hoped for - and last week"s big surge in the rig count suggests this is not about to slowdown as iot rose 25k b/d to a new record high...

 

WTI was hovering right at $55 heading into the DOE data and broiefly broke below on the print. RBOB is notably weaker...

“All of a sudden it seems that positives are in short supply for market bulls,” PVM Oil Associates analyst Stephen Brennock wrote in emailed report. “Yesterday’s slide is being compounded this morning by a fresh dose of price angst” sparked by the API report

"Take That OPEC" - WTI Slides As US Crude Production Jumps To Record High

WTI/RBOB extended losses post-API data overnight, but DOE data sparked some algo chaos as a surprise crude build (+2.24mm vs -2.45mm exp) was offset by a bigger than expected gasoline draw (exactly opposite what API reported). In addition, US crude production jumped to a new all-time high - take that OPEC!

 

API

• Crude -1.562mm (-2.45mm exp)


• Cushing +812k


• Gasoline +520k (-1.85mm exp)


• Distilates-3.133mm

ADOEPI

• Crude +2.24mm (-2.45mm exp)


• Cushing +720k


• Gasoline -3.31mm (-1.85mm exp)


• Distilates -3.359mm

Last night"s API data showed smaller crude draw and a surprise gasoline build, but DOE surprised with a big crude build and biugger gasoline draw (and a notable build in Cushing stocks)...

 

Production has normalized back at cycle highs as storm effects fade, surging to new cycle highs in the last week

 

And total US Crude output just hit a new record high...

 

The trend is not OPEC"s friend...

 

WTI was back below $57 and RBOB below $1.80 ahead of the DOE data, sinking after last night"s surprise gasoline build

“If the EIA data disappoints then it could take further steam off the market,” says Jan Edelmann, analyst at HSH Nordbank.

"The Incredible Shrinking Yard": Growing McMansions Are Increasingly Devouring Backyards

America"s obsession with the ever-growing McMansion, combined with a perpetual lack of funding for said McMansion, has resulted a unique phenomenon which Trulia has dubbed "The Incredible Shrinking Yard."  Analyzing public records to compare residential lot sizes to home footprints, Trulia says that homes built over the past two years occupy a staggering 25% of the land on which they sit, compared to roughly half that amount in 1975. 

Here are some of Trulia"s key findings:

• Nationally, single family homes occupy 17.4% of the lots on which they sit, regardless of the year they were built.

 

• Homes built since 2015 occupy 25% of the land on which they sit, while homes built in 1975 occupy just 13.9%. This is being driven by a combination of lots shrinking by 36.2% and home footprints growing by 15.2% size.

 

• Meanwhile, some of the oldest homes in the country, built in the early 1800s, occupy less than 5.0% of the large lots they are built on. The last time lot usage was nearly as high as it is now was during the early 1900s.

 

• Don’t mind the neighbors? Single family homes in places like Philadelphia, and San Francisco, which are both geographically small but dense, have the highest lot utilization at 57.7%, and 44.2%, respectively.

 

• Want plenty of yard space? Head to New England. Three Connecticut metro areas, Worcester, Mass., Hartford, Conn., and Bridgeport, Conn. make up the places with the smallest amount of house occupying lot space, at less than 7.5%.

 

• While most metro areas have seen lot usage grow since the mid-70s, with Oakland, Calif., and Miami seeing the largest upward swings, six metros have bucked the trend with San Francisco, Memphis, and Long Island, N.Y. moving toward less lot usage.

When national home price growth charts start to look like an Amazon stock chart, despite the fact that wage growth remains non-existent, but you know your family of 4 can never find a way to survive in a house even an inch smaller than 4,000 square feet, it only makes sense that lawn sizes would have to shrink to keep purchase prices somewhat "reasonable"...and by reasonable, of course we mean below FHA lending limits so that those McMansions can be purchased with minimal money down and backstopped by the American taxpayer.

As Trulia notes, since the mid-70s, when the proportion of lots used by new construction hit a national low of 13.6%, it climbed 11.3 percentage points to 25% of the lot of homes built in 2015 or later. Most metro areas have seen lot usage grow similarly. Oakland, Miami, and Indianapolis have seen the largest upward swing in lot usage, with homes built after 2015 occupying 25.6, 24.9, and 20.3 percentage points more, respectively, of the lots they are built on than they did in the mid-70s.

Meanwhile, 7 of the 95 metro areas analyzed by Trulia managed to buck the trend, with San Francisco, Memphis, Tenn., and Long Island, N.Y. actually seeing a 12.9, 11.6, and 6.0 percentage point decrease, respectively, in the percent of lot usage by homes constructed after 2015 when compared with homes built in the mid-70s.

 

With that, here"s a helpful chart depicted just how small the "American Dream" has become in your neck of the woods:

India Stack and Bitcoin (An Insider's View)

By Chris at www.CapitalistExploits.at

Before the good stuff... the fun stuff.

Here"s a fan mail I received in response to this.

I guess he/she never made it as far as this part:

"Don’t get me wrong. I’m not against EVs, and I’m all for technological innovation."

Though, in all fairness, it may be the collagen talking. Either way, definitely not an Insider member, otherwise he/she/it would be well aware of where we"re actually invested. Ha!

Dregs from the bottom of the barrel occasionally drift into my corner of cyberspace. That they respond like this must be due to this fascinating misconception that I give a damn.

Still, if we poke them hard enough in the chest, they"ll bugger off leaving us with the fine specimens that make up the overwhelming majority of our distinguished readership. Which brings me neatly to:

"Hi Chris,

I"m not sure if this gets to you or is stuck in the admin box.

Love your work, really enjoy it.

Your current one on the knock off effects of banning gasoline and diesel cars made me want to bring up another point that is seldom discussed when people talk about the future of EVs... the profitability of refineries when they don"t have a market for gasoline.

When a barrel of crude is refined, about half of its volume ends up as gasoline.  The other half ends up as diesel, jet fuel, bunker oil, chemical feedstocks, etc... Gasoline is great for running automobiles, but pretty lousy for any other industrial process.  Industrial processes such as mining, refining, transporting, and processing cobalt, lithium, and molybdenum into EV parts.  These processes depend on the other half of the barrel.

Driving away (pun intended) the demand for gasoline by mandating EVs means that refineries have half of their product become much less valuable.  I don"t have the research or know of who has done the research, but I wonder what such a move would mean for the price of diesel, jet fuel, bunker oil, chemical feedstocks, etc...?

Hope all is well, cheers!"

Fair points and worth thinking about.

For example. Do those industries taking up the "other half of a barrel" benefit? To what degree? For how long? And is the market pricing this?

All fun stuff which we spend all most of our time doing here.

Anyway, today I"ve got something special for you and it"s got nothing to do with EVs or gasoline.

Bitcoin and India Stack

It was Raoul Pal who first brought to my attention the incredible galactic sized project that is India Stack.

I"ve since spoken with quite a variety of people both in India and out in order to better understand the dynamics of what"s taking place in India. I think it provides a fascinating and illuminating view into how certain problems can be dealt with.

In particular (and I"ve not seen anyone mention this), the ability to recapitalise a banking system on the brink and to do so while transitioning over a billion citizens onto a digital system.

Pre-cash elimination, India"s banks were in a shocking state. What better way to "fix" them than to get the poor to bail them out.

Ever since man began forming communities, we"ve had a setup where those at the top manufacture ways and means to have those at the bottom pay for the things they want.

Kings told stories about their "divine rights", people believed it, priests told stories about the church"s relationship with God, people believed it. And today politicians tell stories about "the greater good"... and people believe it. Some things never change.

Aside from the banking system being recapitalised...

It"s been fascinating to watch what was up until recently one of the world"s largest cash economies and where millions never even had a bank account suddenly goes digital.

So there were two steps here.

The first being the elimination of cash in the economy, and the second bringing online the digital platform otherwise known as IndiaStack, an open source platform where information is a utility.

The set of open API for developers includes:

• The Aadhaar for authentication


• The e-KYC documents that have been generated


• Digital lockers


• e-signatures (software based as against the present dongle based e-signs)


• The Unified Payments Interface which rides on top of the National Payment Corporation of India’s Immediate Payment System.

You can check out a presentation which provides a decent overview of it here.

I"ve spoken with a lot of guys who see this as being a major boon for India"s economy, eliminating fraud, destroying swathes of bureaucracy, and bringing millions of people into the economy who previously never had access.

I don"t disagree with any of this, but what I wanted to do was to find someone who wasn"t very bullish, someone who would challenge some of these thoughts. And with that in mind, I found and spoke to Deepankar Kapoor.

Deepankar Kapoor - as you can probably infer from his name - is not only Indian but he"s also the founder of Bitcoinwiser, a well known face in the digital advertising industry in India with his most recent stint being as the Vice President & National Strategy Head at Ogilvy India.

He has 9+ years of full time recognised experience in digital business transformation of Fortune 500 brands and won many accolades throughout his career. Academically, he holds an MBA from University of Calcutta wherein he majored in Marketing [Forecasting & Econometrics], BMS from Symbiosis International University and a Diploma in Cyber Laws from the Government Law College, Mumbai. Additionally, he is a Google and Twitter Certified Professional.

You can listen to our conversation below. I apologise for the dodgy line at times - Kenyan Wi-Fi isn"t the best in the world.

And a Question for This Week

Cast your vote here and also see what others think

- Chris

"Change is opportunity." — Suresh Prabhu, Union Minister for Commerce

--------------------------------------

Liked this article? Then you"ll probably like my other missives on

this topic as well. Go here to access them (free, of course).

--------------------------------------

Is Google Coming For Your Cryptos

Authored by Tom Luongo via TomLuongo.me,

The big boys, Apple and Google, are now actively developing a payment API for cryptos to use within their browsers.  This is a double-edged sword and possibly indicates a shift in tax policy.

I don’t trust either Apple or Google at all.  The news from Coindesk about Apple and Google developing a payment API on the heels of multiple avenues of officaldom cracking down on cryptocurrencies is enough to give you whiplash.

The work, started by the World Wide Web Consortium (W3C) with the help of Microsoft, Google, Facebook, Apple and Mozilla, is a tangible step forward for a currency-agnostic web payment standard first conceived in 2013. Equally, as bitcoin and other cryptocurrencies gain more momentum, the launch signifies the growing recognition of cryptocurrency as a payments technology.

Indeed, the W3C has gotten more interested in blockchain technologies over the years, hosting its first ever blockchain workshop in June last year. But while participants were left with interest in standardizing and democratizing the technology’s use, no formal work was decided upon then. That, however, has changed.

Announced on Thursday, the API is currently being implemented in browsers including Google’s Chrome, Microsoft’s Edge, Apple’s Webkit, Mozilla’s Firefox, the Samsung Internet Browser and Facebook’s in-app browser. When activated, the Payment Request API will allow new payment types, including bitcoin, ether any any other available cryptocurrency (as well as more traditional online payment methods) to be stored directly in the browser.

The last thing anyone should want is for their cryptos to be held in their browser knowing that all code developed in the U.S. is subject to government intelligence oversight.

Trust Big Google

This is absolutely a Trojan Horse designed to look like it legitimizes cryptos like Bitcoin but immediately puts them at risk of seizure by anyone with malicious intent.

First, it’s not like any code developed by these people is exploit-proof.  Let’s get serious, security on Android, iOS and Windows is a joke.  Google took Linux and made it worse than Windows.  It’s actually an astounding feat of bad engineering.

Microsoft, Apple and Google are all very tight with the U.S. government.

It’s part of the reason why Russia continues to crack-down on use of their software.  Putin knows it’s all spyware.

Second, if your cryptos are stored in your browser then they can be stolen from you.  Forget petty thieves.  I’m thinking much bigger than that.  Do you really think any of these companies would not comply with an IRS decree to seize your assets directly off of your computer?

If you do, then I have a nice piece of water-spanning real estate to sell you connecting Manhattan and Brooklyn.

Moreover, let’s see how this “standard” develops.

Will it support third-party hardware wallets like a Trezor or Ledger?

Will it accept any crypto in payment, including the anonymous ones like Monero and Dash?

If the answers to these questions in no, then that’s your sign that this API isn’t simply another backdoor way to maintain control over everything.

Cause I’m the Tax Man

This announcement makes me believe that the recent bill introduced by House Reps Jared Polis (D-CO) and David Schweikert (R-AZ) will likely sail through Congress.  The bill would exempt cryptocurrency transactions under $600 from capital gains taxes.

While this bill is an unqualified good thing as it will radically improve liquidity it is also the prerequisite needed to jump start this API development. So, while the U.S. will continue to fight the crypto-market officially for as long as it can, it is also bowing to the pressure from its corporate partners to free them up for commerce to begin.

The IRS rule is actually choking off a significant amount of money velocity in the world economy.  This will only get worse if it doesn’t change.  Bitcoin was designed to put purchasing power back in the hands of the people themselves and take it away from the banking system who demand their vig on every transaction.

So, there will be a trade-off to using this API when it is finally released if it doesn’t support the part of the crypto-market the government doesn’t have control over yet.

*  *  *

And finally, don"t forget, "don"t buy bitcoin... it"s going to crash!"

WTI/RBOB Drop After Harvey Prompts US Crude Production Collapse, Biggest Inventory Build In 6 Months

Last night"s first glimpse of Harvey"s impact on energy confirmed a sizable crude build but only modest gasoline draw. WTI/RBOB prices slid into the DOE print and extended losses (after a quick kneejerk higher) following a bigger than expected crude build (+4.58mm vs +4mm exp). Gasoline and Distilates saw bigger draws than API reported but it was the collapse in Lower 48 crude production that stood out with most of Texas offline.

API

• Crude +2.79mm (+4mm exp) - biggest build in 5 months


• Cushing +669k (+1mm exp)


• Gasoline -2.544mm (-5.2mm exp) - biggest draw in 6 weeks


• Distillates -610k

DOE

• Crude +4.58mm (+4mm exp) - biggest build in 5 months


• Cushing +797k (+1mm exp)- biggest build in 5 months


• Gasoline -3.20mm (-5.2mm exp)- biggest draw in 2 months


• Distillates -1.396mm

The inventory changes reported by the API were much smaller than those forecast by analysts. As a reminder, Saxo Bank"s Ole Hanson notes that "inventory data later is a lot of moving parts which could be quite skewed away from what we’ve seen in recent weeks." Additionally, investors “are going to be skeptical of the data,” James Williams, an economist at energy researcher WTRG Economics, told Bloomberg. “It might be pretty flaky data this week and next, so I don’t expect to see a big market-mover”

Bloomberg"s Fernando Valle notes energy"s past week was all about Hurricane Harvey as refineries shuttered, choking output and hauling down inventories of gasoline and distillates.

Bigger than expected crude build and bigger gasoline and distillate draws than API reported...

Bloomberg"s Fernando Valle points out that the increase in crude inventories was largely expected after the devastating impacts of Hurricane Harvey on the Gulf Coast. The draw on refined product inventories was weaker than expected, as lost demand -- both locally and abroad -- offset lower-than-expected refinery utilization. Investors" focus will now shift to the restart of refineries and export ports.

As one might expect, Gulf Coast imports fell to a record low.

Bloomberg"s David Marino notes that exports tumbled with Texas ports closed.

Crude was the lowest since 2014, before the export limits were lifted. Gasoline fell by more than half to 319,000 barrels a day, the least in four years, and distillate shipments were the lowest since 2011. Look for those numbers to rebound as ports and pipelines reopen fully.

Production declined in the previous week, and with most of Texas ofline last week - Crude production in the Lower 48 collapsed...

This is the biggest week-on-week fall since August 2012, when Hurricane Isaac shut in more than 1.3 million barrels a day of Gulf of Mexico production.

WTI and RBOB have drifted lower after last night"s API data, heading into the DOE data. The kneejerk reaction to the crude build, gas draw and production crash was higher prices...

But that did not last long...

Brent “reached the May high and so far it’s been firmly rejected,” says Ole Hansen, head of commodity strategy at Saxo Bank. “It’s quite significant if we are getting a decent rejection here as it could indicate a short-term top in the market”

“It’s a market that is starting to struggle to move much higher, Brent crude up to $55 is probably as good as it gets at this stage”: Hansen