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.
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