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Insights across the energy value chain

US crude oil stocks posted an increase of 4.7 MMBbl from last week. Gasoline inventories increased 3.7 MMBbl and distillate inventories increased 0.8 MMBbl. Yesterday afternoon, API reported a large crude oil build of 2.4 MMBbl, alongside a gasoline build of 0.4 MMBbl, but distillate dropped by 0.2 MMBbl. Analysts, to the contrary, were expecting a crude oil draw of 2.0 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a significant increase of 16.8 MMBbl. For a summary of the crude oil and petroleum product stock movements, see the table below.

US crude oil production increased 100 MBbl/d last week, per the EIA. Crude oil imports were down 669 MBbl/d last week to an average of 6.9 MMBbl/d. Refinery inputs averaged 16.6 MMBbl/d (98 MBbl/d less than last week’s average), leading to a utilization rate of 89.9%. The inventory report is bearish due to the large crude oil and total petroleum stocks builds. Prompt-month WTI was trading down $2.05/Bbl, at $61.08/Bbl, at the time of writing.

Prices continued to trade with a neutral bias over the past week. Participants seem content to take a cautionary bias in the market, waiting for directional confirmation supported with news events. Prices are trading lower on the day due to the large, unexpected crude oil & petroleum products build. In the backdrop, rising tensions in the Middle East and OPEC cuts continue to keep the floor up for prices. The US continues to classify Iran as a high-threat country. Saudi Arabia reaffirmed that they are committed to keeping a stable and balanced global crude oil market. These considerations are the main focal point of bullish sentiment. On the other hand, the impending tariff wars with China continue to remain a concern for demand prospects. No further talks between the US and China are currently scheduled.

Should the conflict with Iran erode, the commonly traded 200-day average (currently at ~$60/Bbl) is a target for declines. This has held all the declines (on a daily closing basis) since early March. Should the conflict escalate, prices will likely head north, challenging the $64.75/Bbl area up to $67/Bbl. Regardless of the two-directional sides to prices, higher volatility should be expected in the coming weeks as the market digests the geopolitical circumstances.

Petroleum Stocks Chart

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