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 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...

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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

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

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.

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."