WTI Slides After Surprise Crude Build, Petroleum Product Demand At Highest Since March

WTI Slides After Surprise Crude Build, Petroleum Product Demand At Highest Since March

Tyler Durden

Thu, 11/12/2020 – 11:06

Since API reported (on Tuesday) a bigger than expected draw across the entire energy complex, oil prices have oscillated higher, lower, and now higher this morning as vaccine hopes battle lockdown fears and Libya supply concerns offset signals that OPEC+ will decide to delay an output hike planned for January.

“The group is highly unlikely to drop the ball now and will likely emerge from the meeting with a strong and solid message, holding current cuts into the first quarter of 2021 while also opening for further action if needed,” said Bjarne Schieldrop, chief commodities analyst at SEB AB.

“The vaccine is not here yet and the oil market is not out of the woods.”

Prices earlier slipped as the International Energy Agency cut its forecast for global oil demand, saying the coronavirus vaccine breakthrough won’t quickly revive markets.

The IEA’s warning comes as the pandemic continues to pressure consumption, most notably in Europe.

Additionally, as Bloomberg reports, a big crude stockdraw in today’s data shouldn’t come as too much of a surprise. The Bureau of Safety and Environmental Enforcement reported 4 million barrels of Gulf of Mexico crude production lost during the week ended Nov. 7 as a result of the passage of Hurricane Zeta through the area. The chart below shows the reported production losses since August, when Hurricanes Marco and Laura kicked off the most active part of this year’s hurricane season.

API

  • Crude -5.1mm (-3.0mm exp)
  • Cushing -1.2mm
  • Gasoline -3.3mm (-600k exp)
  • Distillates -5.6mm (-2.0mm exp)

DOE

  • Crude +4.28mm (-3.0mm exp, -4.21mm whisper)
  • Cushing -518k
  • Gasoline -2.309mm (-600k exp)
  • Distillates -5.355mm (-2.0mm exp)

After the previous week’s big surprise crude draw (and API’s reported large draw this week), analysts expected more drawdowns across the energy complex but in a big surprise, crude stocks rose by 4.28mm barrels. Gasoline stocks drew down for the 9th straight week

Source: Bloomberg

Gasoline demand rose very modestly last week but remains around the early July levels…

Source: Bloomberg

Although the crude build was a surprise, total products supplied hit the highest since March. This is the most bullish data point the market could ask for.

Source: Bloomberg

Notably Crude stocks (ex-SPR) were down to their lowest since April before today’s build…

Source: Bloomberg

Continued shut-ins from storms means the production data in the US remains hard to judge on a trend basis…

Source: Bloomberg

WTI was hovering around $42 (10-week highs) ahead of the official EIA inventory and production data and slid lower after the surprise build…

And we suspect it has further to fall if a Biden admin gets its way and orders a national six-week lockdown.

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Author: Tyler Durden

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