An Autopsy of Lowest Selling Pressure EVER: S&P 500, NASDAQ 100 and DJIA Futures DataViz

E-mini S&P 500 Futures (ES)

 

Based on candlestick wick analysis and data across all three primary US futures contracts, there is less selling pressure than ever before.

Not since xyz, not since insert year here... there is less selling pressure than ever.  But everything"s awesome, right?  Just BTFD, right?

If "real technical analysis" was stranded on a desert island with only one wish: #RealTA would ask for candlesticks.  And currently there is a complete and utter lack of top wicks – more so than ever before in the history of ES, YM, and NQ futures. The relentless rally of the past 75 trading sessions has resulted in the lowest 50-day, 100-day, 200-day, and 500-day totals of bottom wicks since ES futures began trading.

So, while volatility and average true range have been missing (read as: kidnapped), so has any semblance of selling pressure; and the top wicks that indicate it.

Aside from an unexpected flash crash type scenario, futures are unlikely to plot a long-term or short-term top without indication of waning buying pressure and/or intensified selling pressure.  At some point in the central bank liquidity orgy flow induced future, all this buying pressure will exhaust itself and we will likely see evidence of an actionable top – in the form of increased frequency and size of top wicks – indicating that selling pressure has arrived (read as: awoken from a morphine overdose induced coma) and that equity "markets" are finally ready to chill.

 

 

 

 

 

Here is another astonishing datavizualization of market structure and ES volume, courtesty of dataviz legend @nanexllc... starting at 11am during the 12/01 session, S&P 500 futures registered record-breaking volume by trading more contracts during that hour than at any other since at least 2005. 

 

The hour beginning at 11am last Friday had the highest $Volume traded in S&P500 futures since at least 2005. 2nd highest was flash crash. $ES_F pic.twitter.com/m9MikNo4H6

— Eric Scott Hunsader (@nanexllc) December 4, 2017

 

 

Is today’s session a bearish omen of an impending correction? 

 

While theoretically possible from a technical perspective: fishing for a top, on the same day that new highs are made, is unlikely ever wise.  Nevertheless, today’s session (12/4) gave us @Fibozachi a very interesting trio of bearish candlesticks for the S&P-500, NDX and DJIA that are each noteworthy. 

 

 

E-mini NASDAQ-100 Futures (NQ)

 

NASDAQ-100 futures (NQ) plotted a large bearish engulfing candlestick; where it’s real body engulfed that of the past two trading sessions.  Because we saw this same candlestick pattern on 11/29, today’s price action confirms that the NDX’ short-term technical outlook is becoming increasingly bearish.  If selling pressure continues, the first short-term downside support speedbump for NQ will be found at 6,200... from there, there is a strong support shelf that spans 6,150 - 6k. 

 

 

 

 

E-mini DJIA Futures (YM)

 

DJIA futures (YM) plotted a shooting star candlestick, meaning:

1. it opened higher than yesterday...


2. traded up to new highs.. and


3. then came back down to close at almost the same exact price as the open.

 

12/4’s YM session also registered as a filled white candlestick; meaning that while YM closed higher than yesterday’s close, that it also closed below yesterday’s open.

When a shooting star candle plots after a strong rally, it is often a warning sign that bullish momentum may be exhausted; the opposite is also true for hollow red candles after a sell-off.

While additional confirmation is required, this is the type of bearish candlestick pattern that may seem obvious in retrospect when looking for signs of a market top.  If selling pressure continues, short-term downside targets are 23,600 with a strong support shelf at 23,200. 

 

 

 

 

E-mini S&P 500 Futures (ES)

 

S&P 500 futures (ES) plotted a bearish engulfing candlestick pattern for the first time in 4 months.  This type of pattern - after such^ a relentless rally - has an increased chance of follow-through ... though in this instance it may just lead to a short-term sentiment reset rather than a legitimate sell-off.  If selling pressure continues, short-term downside targets span 2,550 to 2,600.

 

 

 

 

Volatility Index Futures (VX)

 

VIX futures (VX) plotted a bullish engulfing candlestick pattern for the first time since 8/08/17.  The last daily instance of this pattern triggered a surge that sent $VIX #PriceAction from 16.50 to 19.45 in just 3 sessions.

Today’s instance (12/4) provides additional technical evidence that major US equity ‘markets’ may be topping.  Should VX futures continue to rally... they will likely retest 13.50 before encountering genuinely firm resistance at 14.70 - 15.00.. with extremely strong resistance at 16.50.

 

 

 

Check out Fibozachi.com to learn about modern technical analysis and trading indicators that actually work.

Future’s have Less Selling Pressure than Ever Before… until now?

Brent Crude Spikes To Highest Since July 2015

North Korean war-talk has extended early gains for Brent Crude (driven by anxiety over the post-Kurd-referendum fallout), pushing prices to their highest since July 2015.

To the highest since July 2015...

As Bloomberg reports, Kurdish oil supplies may be in jeopardy as Turkey, Iran and the Iraqi central government in Baghdad sought to isolate the semi-autonomous Kurds as balloting began on Monday. Meanwhile, OPEC and its partners implemented more than 100 percent of their agreed cuts last month, OPEC Secretary-General Mohammad Barkindo said Friday in Vienna, providing more fuel to the oil rally.

“It’s pretty clear the Kurds are going to vote for independence and we will have yet another geopolitical hot spot in the Middle East that threatens a significant amount of oil supply,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone.

At the same time, “the cooperation and the strong effort by OPEC is registering with the market.”

Brent crude oil futures curve has moved into backwardation in recent weeks, indicator of supply tightness...

And the Brent-WTI spread reaches its highest since August 2015...

You Can Only Choose One: Cheap Oil Or A Weak Dollar

Authored by Charles Hugh Smith via OfTwoMinds blog,

When the price of oil rises to the point of pain, just remember the handy-dandy discount mechanism: a much stronger US dollar.

Glance at this chart of the trade-weighted U.S. dollar, and note the swing highs and lows in the price of oil per barrel around each peak and trough. You can look up historical inflation-adjusted prices of oil in USD on this handy chart: Crude Oil Prices - 70 Year Historical Chart (macrotrends.net)

The correlation isn"t perfect, of course. Oil was relatively cheap between 1986 and 2003, due to a relative abundance of supply as Saudi Arabia and new fields ramped up production, with two periods of extreme price action: a brief spike higher in 1990 preceding the First Gulf War, and a collapse to $17 in the 1998 Asian Contagion financial crisis.

Geopolitical crises, wars and supply shocks will move oil prices regardless of the value of the USD. That said, it"s clear that absent such shocks, there is a strong correlation between a stronger USD and lower oil prices (in USD of course) and a weaker dollar and higher oil prices.

The reason why is straightforward: if the dollar gains purchasing power against other currencies, it buys more oil for each dollar.

Conversely, when the USD weakens, its purchasing power declines and it takes more USD to buy an imported barrel of oil.

(Note that the price of domestically produced oil is largely set on the global marketplace. West Texas crude oil may be a few dollars less per barrel than Brent crude oil, but if the global price skyrockets, so does the price of US-produced crude.)

Since oil and gas are the essential resources of the industrial economy, the price paid by consumers and commercial users matter.

The one way the US can get an across-the-board global discount on oil is to push the purchasing power of the USD higher. That is an enormous benefit that few commentators ever mention. Instead, pundits talk about the benefits of a weaker dollar, which boil down to lower priced exports.

Which matters most to households and enterprises? A tiny blip higher in exports (a relatively modest slice of the U.S. economy) or lower energy prices at the pump?

If a recession were to pressure household budgets, the one sure way to lower household spending on oil/gasoline would be to strengthen the USD.

There are two basic mechanisms that strengthen the USD: raise interest rates, so global capital flows to USD-denominated debt to earn the higher yield, or a global financial crisis which causes global capital to seek the relative safe haven of the USD.

In a global crisis, liquidity and credit will dry up, and all those non-US debtors holding the $11 trillion in USD-denominated debt I mentioned on Friday will be scrambling for USD to service their debts. This will also increase demand for USD, pushing the USD higher.

The Federal Reserve insists that yields must remain near-zero or the economy will collapse. Americans paying 15% to 23% interest on their credit cards haven"t seen any benefit from near-zero rates, nor have student-loan debtors. The real beneficiaries of low yields are financiers, banks and corporations which borrow immense sums for next to nothing. (Try finding a credit card with a 1% or 2% interest rate.)

At some point, the price of oil might start mattering to households and businesses. Note that the discoveries of oil are now a thin slice of annual consumption. As the cheap oil is depleted, what"s left is the costlier-to-extract stuff.

Even more alarming, the global supply of oil might fall well below global demand, and stay there.

When the price of oil rises to the point of pain, just remember the handy-dandy discount mechanism: a much stronger US dollar.

*  *  *

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WTI Hovers Above $50 As US Oil Rig Count Slides To 3-Month Lows

With crude production rebounding back to pre-Harvey levels, and refinery demand coming back on-line, WTI has trod water around $50 all week. The US oil rig count dropped for the 6th straight week (down 5 to 744), back at its lowest level since early June.

• *U.S. OIL RIG COUNT DOWN 5 TO 744 , BAKER HUGHES SAYS :BHGE US


• *U.S. GAS RIG COUNT UP 4 TO 190 , BAKER HUGHES SAYS :BHGE US

As Bloomberg reports, it looks like shale billionaire Harold Hamm might be right in saying U.S. producers are being more cautious than government output forecasts seem to imply.

At least that’s what the Baker Hughes weekly drilling report suggests, showing producers idled five oil rigs this week, adding to 19 parked over the previous five weeks.

The numbers released every Friday increasingly make it look like the drilling boom might have peaked, and that should impact output down the road.

Shale drillers will be disciplined in how much they produce, Hamm, chief executive officer of Continental Resources Inc. and one of the pioneers of the shale revolution, said on Bloomberg TV Thursday.

The government projection of more than 1 million new barrels a day in U.S. production this year is "flat wrong" and distorting prices, he said.

Production continues to rebound as more of Texas comes back online (despite the stagnation of oil rig counts)...

It’s going to come down to the November meeting and the market will be looking for not so much an extension of the deal, but deeper cuts, says Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors.

“We’ve been in a tight range the last couple of days, not really going anywhere and at the end of the day, winding up at the same prices”

WTI Crude Fails At $50 Again As Rig Count Tumbles Most In 8 Months

As Texas slowly normalizes from Hurricane Harvey"s impact, production has rebounded but the rig count continues to tumble (down 7 to 749 this week). This is the biggest weekly drop in oil rigs since Jan 2017 and June 2016. WTI Crude futures have once again tested $50 (and failed) this morning.

This is the 5th week in a row with no increases in oil rig counts.

The massive collapse in US crude production last week - with most of Texas offline - has recovered somewhat with a 572k surge in production this week. However, it is clear that levels of production are well off pre-Harvey levels...

WTI retested $50 this morning, and failed, but RBOB gasoline is on the rise...“The dollar is once again weakening and that is adding some support to oil too”

However, some remain bulish - “The market is realizing that demand is a lot stronger than there was given credit for,” says Phil Flynn, senior market analyst at Price Futures Group. “The untold story hidden behind the glut has been the demand growth”

Rig Count Slumps To 3-Month Lows As US Crude Production Collapses

US crude production collapsed this week with most of Texas offline and we would expect rig counts to have continued to stabilize (if not fall) following the lagged track of WTI, and they did - oil rigs dropped 3 to 756, the lowest since June.

As a reminder, 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 prices tumbled today after China refinery cut headlines...

Uncertainty has the “market pulling in their horns ahead of the storm. They are worried about demand destruction,” Phil Flynn, senior market analyst at Price Futures Group, says. The market also “seems to be a little technically heavy”

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

US Crude Production Stalls As Oil Rig Count Rolls Over

Amid the chaos and turmoil caused by Harvey, today"s rig count data is likely to change things as much as a fart in a hurricane. US crude production in the Lower 48 actually fell last week, syncing with the stabilization in the lagged oil rig count.

The US Oil Rig count held to two-month lows last week, unchanged at 759...

US Crude production in the Lower 48 dropped last week following a stabilization in rig counts (but rose 2k overall thanks to a pick up in Alaska)...

Notably RBOB prices are down today (and WTI) as  John Kilduff, a partner at Again Capital, notes “The government is actually reacting positively trying to address and do what they can,... There are some signs of life in several of the refineries already and the 1 million-barrel tapping of the SPR is also helping to ease anxieties over the storm”

Crack Spreads Rip to Two Year Highs, Post Harvey

Content originally published at iBankCoin.com

Most of you see WTI down 3% today and think Harvey didn"t affect the oil trade -- but you"re wrong. 321 crack spreads are blowing out because of damage to the refinery sector.

Gasoline is higher by 3% today -- causing 321 cracks to blow out to its largest spread in two years. This is pure profit for refineries.

Here are the refinery stocks on the move. DK has been the best performer over the past week.

According to S&P Platts, 10 refineries in Texas, producing 2.2 million barrels per day, are shut in due to Harvey.

Mauldin: "4 Charts Why You Should Run Away From The S&P 500"

Authored by John Mauldin via MauldinEconomics.com,

My friend James Montier, now at GMO, and his associate Matt Kadnar have written a compelling piece on why passive investors should avoid the S&P 500.

Their essay argues that the forward growth potential of the S&P 500 is significantly lower than that of other opportunities, especially emerging markets.

Let’s look at a few of their charts.

For the Next 7 Years, S&P 500 Returns Will be a Negative 3.9%

The chart above breaks the total return from the beginning of the current bull market in the S&P 500 into its four main components: increasing multiples, margin expansion, growth, and dividends.

He notes that this total return is more than double the level of long-term real return growth since 1970.

If earnings and dividends are remarkably stable (and they are), to believe that the S&P will continue delivering the wonderful returns we have experienced over the last seven years is to believe that P/Es and margins will continue to expand just as they have over the last seven years. The historical record for this assumption is quite thin, to put it kindly. It is remarkably easy to assume that the recent past should continue indefinitely, but it is an extremely dangerous assumption when it comes to asset markets. Particularly expensive ones, as the S&P 500 appears to be.

More bluntly put, the historical record supporting this assumption is non-existent. It never happened. Just saying…

The authors then describe how they build their seven-year forecasts of S&P 500 returns.

They argue that for the next seven years, returns will be a negative 3.9%. Note that GMO is not a perma-bear money-management business. Their forecasts were extremely bullish in February 2009.

They are a valuation shop, pure and simple. Investors—typically large institutions and pension funds—that are leaving Grantham’s management firm now are going to regret it. The consultants or managers who suggested that move are going to need to polish their résumés.

No Good Options Are Left

The bottom line? “The cruel reality of today’s investment opportunity set is that we believe there are no good choices from an absolute viewpoint - that is, everything is expensive (see the chart below).”

For a relative investor (following the edicts of value investing), we believe the choice is clear: Own as much international and emerging market equity as you can and as little US equity as you can. If you must own US equities, we believe Quality is very attractive relative to the market. While Quality has done well versus the US market, long international and emerging versus the US has been a painful position for the last few years, but it couldn’t be any other way. Valuation attractiveness is generally created by underperformance (in absolute and/or relative terms). As Keynes long ago noted, a valuation-driven investor is likely seen as “eccentric, unconventional, and rash in the eyes of average opinion.” [Emphasis mine.]

In absolute terms, the opportunity set is extremely challenging. However, when assets are priced for perfection as they currently are, it takes very little disappointment to lead to significant shifts in the pricing of assets. Hence, our advice (and positioning) is to hold significant amounts of dry powder, recalling the immortal advice of Winnie-the-Pooh, “Never underestimate the value of doing nothing” or, if you prefer, remember—when there is nothing to do, do nothing.

Markets appear to be governed by complacency at the current juncture. Indeed, looking at the options market, it is possible to imply the expected probability of a significant decline in asset prices. According to the Minneapolis Federal Reserve, the probability of a 25% or greater decline in US equity prices occurring over the next 12 months implied in the options market is only around 10% (see Exhibit 12). Now, we have no idea what the true likelihood of such an event is, but when faced with the third most expensive US market in history, we would suggest that 10% seems very low.

Those are wise words indeed.

US Crude Production Hits 25-Month Highs Despite Stabilization In Rig Count

While the US oil rig count has gone nowhere for the last 9 weeks (down 4 to 759 this week and with last week"s drop the largest in 7 months), US crude production continues to rise, now at its highest since July 2015.

• *U.S. OIL RIG COUNT DOWN 4 TO 759 , BAKER HUGHES SAYS :BHGE US

The US oil rig count continues to track the lagged WTI almost perfectly. This is the biggest 2-week rig count drop since May 2016.

Despite stabilization in rig counts, US crude production continues to trend higher, jumping to its highest since July 2015 last week...

Of course, price action has been dominated by Hurricane Harvey headlines...

$20 Oil? Forget OPEC, China Controls Oil Prices

Authored by Irina Slav via OilPrice.com,

U.S. shale has taken a lot of headline space recently as the biggest headwind for oil prices and the highest stumbling block for OPEC’s efforts to prop them up by cutting production. Yet, there may be another factor that could bring down oil prices as soon as next year...

China.

China has been building a strategic crude oil reserve for the last decade, but the size of that reserve remains undisclosed, with analysts making estimates based on China-bound cargoes and satellite imaging.

Last year, a Silicone Valley tech company, Orbital Insight, suggested that China may have stored as much as 600 million barrels of crude by May. This was the highest reserve estimate at the time. Since then, the reserve has in all likelihood grown, possibly exceeding the U.S. SPR, which stood at 678.9 million barrels as of August 18th this year.

This year, Chinese crude imports have run at record-breaking rates, with the average daily on par with what the U.S. imports, at about 8 million barrels, the Financial Times notes in an analysis. A lot of these, however, are going into storage tanks, analysts believe, and they warn that soon the tanks may fill up, wreaking havoc on prices and--more notably--on OPEC.

The cartel, Russia and 11 other producers agreed last year to remove 1.8 million bpd from global oil supply in an attempt to raise prices above US$50, with hopes for at least $60. This May, they agreed to extend the cuts to March 2018. Nevertheless, prices have remained largely stable around the $50 mark because of rising U.S. output, which last week jumped above 9.5 million bpd, according to the EIA.

Chinese imports have played the counterweight, this year rising at a rate double the usual one, according to RBC Capital Markets’ head of global energy strategy, Michael Tran, as quoted by the FT.

What is most alarming is this: If the rate of imports slows down from the current 1-million-bpd, prices are bound to take a hit. The chance of the growth rate falling is quite big – last month imports slumped to the lowest since the start of the year, at 8.16 million bpd.

Analysts from FGE Energy have bad news for the oil industry. They have estimated, the FT says, that the growth rate of crude oil imports in China will slow down to 700,000 bpd in the second half of this year. For next year, the forecast is gloomier: imports will only increase by 100,000 bpd as Chinese producers expand their output abroad and even at that rate of increase the country’s strategic reserve could be filled to capacity by the end of the year.

Now let’s remember that OPEC and Russia have agreed to pump less until March 2018. Nobody knows what will happen after that, and while some experts are calling for the cartel and its partners to continue producing less for a longer period of time, it’s doubtful if everyone would be on board with this idea. In fact, we may well see taps being turned on again. It may be time to start considering the possibility of $20 oil again.

WTI Algos Uncertain After Gasoline Inventories Draw But Crude Production Surges

WTI crude prices managed to scramble back up to pre-API-tumble levels ahead of DOE"s data dump this morning with all eyes on gasoline inventories, which did not disappoint showing a small draw (in line with expectations) along with crude"s draw which was roughly in line with API and expectations. Production continues to rise to highest since July 2015.

API

• Crude -3.595mm (-3.5mm exp)


• Cushing -462k (+300k exp)


• Gasoline +1.402mm (-1mm exp)


• Distillates +2.048mm

DOE

• Crude -3.33mm (-3.5mm exp)


• Cushing -503k (+300k exp)


• Gasoline -1.22mm (-1.25mm exp)


• Distillates +28k

Builds in products (gasoline and distillates) according to API is weighing on markets (and a big shift from last week"s massive crude draw), but DOE data showed a draw for gasoline (in line with expectations) and a draw for crude (in line with expectations)

Total Crude Oil Inventories dropped to the lowest since Jan 2016... But as is very clear, remains dramatically over-stocked relative to pre-2015 norms...

One crucial data point that Bloomberg"s Javier Blas notes: total U.S. oil stocks (which includes crude, refined products and the volatile "other oils" category) were unchanged last week. That"s not what the bulls need.

Amid all the bluster, we found it ironic that Crude imports from Venezuela climbed 52 percent to 987,000 barrels a day, also the most since April.

U.S. Fuel Demand Fell 0.72% in Past Four Weeks

Despite stabilization in rig counts, US crude production continues to trend higher, jumping to its highest since July 2015 last week...

A weak dollar and some BTFDing in stocks managed to scramble WTI up to the pre-API levels ahead of the DOE data... (NOTE: futures puked a little right before the print). After the data, the machines were confused but the trend for now is higher as $48 stops are run...

But its mostly noise as the algos cant decide which way to trend for now.

Bloomberg Intelligence energy analyst Vince Piazza sums up the mixed picture:

The crude stockpile drop was basically in line with mean estimates.

The net draw across the petroleum value chain is a modest positive.

However, a drop in refinery utilization foretells ebbing of demand, as driving season comes to an end.

The bearish view is reinforced by output above 9.5 million barrels a day and pushing higher, based on management commentary from 2Q earnings calls.

WTI/RBOB Slide After Oil Production Surge Offsets Biggest Crude Draw Since Sept

Following last night"s mixed mesage from API (crude draw, gasoline build), WTI prices have gone nowhere as all eyes focus on DOE data this morning. Confirming API"s trend, crude saw its biggest draw since Sept 2016 but Gasoline, Distillates, and Cushing (most since March) saw builds which upset the machines and sent prices lower. Crude production rose once again to its highest since July 2015.

API

• Crude -9.2mm (-3.38mm exp) - biggest draw since Sept 2016


• Cushing +1.7mm (+700k exp) - biggest build since March


• Gasoline +301k (-450k exp) - second weekly build in a row


• Distillates -2.1mm (-250k exp)

DOE

• Crude -8.945mm (-3.38mm exp) - biggest draw since Sept 2016


• Cushing +678k (+700k exp) - biggest build since March


• Gasoline +22k (-450k exp)


• Distillates +702k (-250k exp)

Last week"s surprise build in gasoline (confirmed by API) and big draw in crude (also confirmed by API overnight) remains the big focus and DOE data confirmed it with the biggest crude draw since Sept 2016 but builds in products and at Cushing...

While the builds in produst were modest, they were nevertheless a surprise shift in trend from draws to builds...

Imports from Saudi Arabia jumped 47 percent to 813,000 barrels a day, but remain well under the 1-million barrel figure exceeded through much of the first two quarters of this year.

As Bloomberg"s David Marino notes, the total stockpile draw of 7.32 million barrels brings inventories to the lowest since January 2016, but still more than 200 million barrels above November 2014, when the glut really started building up. A lot of work still to do, as OPEC well knows.

Some more details, courtesy of Reuters: total commercial stocks fell -8.9 million bbl to 466 million bbl in the week to Aug 11 (much faster than normal at this time of year).

Total stocks are now -25 million bbl below 2016 level but... +134 million bbl over 10-yr average.

Stocks are now down -13 million bbl since start of year compared with +40 million rise in 2016 and 10-yr avg of +25 million, as the rebalancing appears to be taking shape.

Meanwhile, refinery throughput unchanged last week"s record 17.6 million b/d.

One number which the market was closely watching were gasoline stocks, which disappointed the bulls by rising fractionally by 22kb, and basically unchanged at 231 million bbl, despite an expectation of a 1mm decline.

As a result, gasoline stocks are now 2.3mm bbl below similar levels last year, but are 19 mm bbls above the 10 year average.

Finally, while domestic production increased again, so did imports, which accelerated by +364,000 b/d to 8.1 million b/d in the week to Aug 11

While rig count growth has stabilized, crude production continues to rise in the Lower 48 (though had dropped in Alaska for 3 straight weeks) but both saw a rise this week (total production up 79k) as Lower 48 production hit its highest since July 2015...

Bloomberg notes that U.S. oil production from major shale plays is set to hit another record at 6.15 million barrels a day next month, according to the EIA. It"s not just the Permian that"s growing, as the agency sees higher output across the board.

WTI Crude prices barely budged from last night"s API print heading into the DOE data, spiked higher on the crude draw but slipped back lower on product builds and production surge...

Heading into the print, "the size of a potential draw in crude inventories is “going to be the most material” aspect of the report, Brad Hunnewell, senior equity analyst at Rockefeller & Co., says, adding that "investors also expect to see a rise in gasoline demand."

However, as Bloomberg Intelligence energy analyst Vince Piazza notes:

No change to our bearish view: long road to recovery still ahead. We still see mid $50-$60s as the threshold for acceleration of U.S output. Commentary from exploration and production company conference calls implies drilling efficiencies are aiding productivity.

Elevated refining utilization has helped deplete bloated inventories across the petroleum value chain during the key seasonal driving period, and exports have helped as well. However, the market is seeing the end to summer, with runs traditionally declining in early fall.