WTI Slides After Crude Inventory Data Disappoints, Production Rebounds

WTI Slides After Crude Inventory Data Disappoints, Production Rebounds

Tyler Durden

Wed, 09/16/2020 – 10:35

Oil prices have extended gains after last night’s surprisingly large crude draw sending WTI near $40 despite oil investors are processing a slew of bearish calls this week.

The International Energy Agency warned on Tuesday that the outlook is “even more fragile” due to a resurgence of the coronavirus. That followed weak demand forecasts from BP Plc, Trafigura Group and OPEC.

“The oil market’s upward momentum this morning is primarily driven by the surprise draw in U.S. crude stocks,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA.

“The economic recovery will continue globally, albeit unevenly, and if OPEC+ stays the course the market will re-balance, deflating excess inventories built during the first half of the year.”

Will the official data confirm API’s?

API

  • Crude -9.517mm (+1.27mm exp)
  • Cushing -789k (+2.608mm) exp)
  • Gasoline +3.762mm (-160k exp)
  • Distillates -1.123mm (+600k exp)

DOE

  • Crude -4.389mm (+1.27mm exp)
  • Cushing -74k (+2.608mm) exp)
  • Gasoline -381k (-160k exp)
  • Distillates +3.461mm (+600k exp)

After a surprise build in the prior week, analyst expectations were for another modest build (but API reported a massive draw) and official data also showed a draw (but smaller than API). Additionally, gasoline stocks drew down for the 6th week in a row…

Source: Bloomberg

Still facing disruptions from the various storm-driven shut-ins of refiners and drillers across the gulf, US crude production did manage to retrace to pre-storm levels…

Source: Bloomberg

WTI hovered around $39.50 ahead of the official data (up notably from the API data print levels), and slipped lower on the smaller crude draw…

Bloomberg Intelligence Senior Energy Analyst Vince Piazza warned that inventory and price volatility caused by storm related shut-ins should linger in a fairly active hurricane season. Demand concerns persist as we’ve moved past driving season with few near-term catalysts. Increased production is also a concern as frac units have bounced off their most recent bottom and well completions have rebounded.

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Author: Tyler Durden

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