- US crude oil inventories posted a substantial increase of 9.9 MMBbl last week, according to the weekly EIA report. Gasoline inventories increased 0.9 MMBbl, and distillate inventories decreased 1.3 MMBbl/d. Total petroleum inventories showed a large increase of 12.7 MMBbl. US crude oil production increased 100 MBbl/d last week per EIA. Crude oil imports were up 265 MBbl/d to an average of 7.4 MMBbl/d versus the week prior.
- The WTI price regained some of its strength as the market ignored comments surrounding the Trump administration’s conversations with Saudi Arabia. These comments regarding increasing oil flow and keeping gasoline prices in check had a negative impact on prices in the week prior. That enthusiasm was supported with the news of Venezuelan opposition leader Juan Guaido calling on the population and military to seize power from President Maduro. Unfortunately for the rally, the uprising fell short of expectations as the week wore on.
- The upcoming OPEC meeting and decision regarding the supply cuts will likely hinge on the effects of the Iranian production and the global supply-demand levels. The Saudis mentioned last week that the supply cuts may be extended beyond June depending on the situation.
- This uncertainty going into the OPEC meeting will lead to a potentially volatile period for oil prices. Last week’s bearish inventory data confirms the potential volatility for the market as petroleum stockpiles grew substantively despite the supply reductions imposed earlier in the year. The market is also digesting the effects of US production as it continues to grow, which will take market share from other producing countries and shows no signals of slowing.
- The CFTC report (positions as of April 30) showed the Managed Money long component taking some profits by reducing speculative length by 8,969 contracts while the Managed Money short component increased their position for the first time in weeks, adding 5,429 contracts.
- The price collapse after the inventory release was dramatic and swift, with most of the losses coming on Thursday after traders got a chance to digest the new data point. The declines took prices down to $60.95, just above the commonly traded 200-day moving average, which now sits at $60.95 going into today’s trade. While prices rebounded a little on Friday (hitting $62.52), prices resumed weakness by the end of the day, closing the week at $61.94.
- Market internals are now neutral bias with the retracement, as prices are now in the lower end of the expected short-term range of between $60 and $67. The volume was down week-on-week but remained strong compared with recent weekly averages. Open interest also gained slightly as prices fell during the week according to preliminary data from the CME.
- Prices have consolidated, as expected, and are now facing some critical support levels that will need to hold before the market develops a negative bias. The first area is the aforementioned 200-day moving average at $60.95. This is a commonly traded average for the speculative sector, and a close below it (on a daily basis) will likely bring about additional selling and profit taking. These declines may take prices down to the breakout levels between $57 and $58 from early March. Should the critical support level hold and prices catch a bid (as they did early Friday), $62.52 and up to last week’s high of $64.75 will likely find substantive selling. The market may be entering a period of volatility and range expansion, depending on the extent of the rebound off of the support test.
- Natural gas dry production showed an increase of 0.19 Bcf/d, while Canadian imports increased 0.29 Bcf/d.
- Demand showed the Res/Com market sector rising 3.27 Bcf/d, while Power and Industrial demand increased 1.99 Bcf/d and 0.18 Bcf/d, respectively. LNG exports showed a gain of 0.34 Bcf/d, while Mexican exports increased 0.05 Bcf/d. Total supply for the week showed a gain of 0.48 Bcf/d, while total demand rose 6.00 Bcf/d.
- The storage report last week showed injections for the previous week at 123 Bcf. Total inventories are now 128 Bcf higher than at the same time last year and 316 Bcf below the five-year average.
- The CFTC report (as of April 30) showed the Managed Money long sector reducing positions by 11,358 contracts, while the Managed Money short position increased by 16,955 contracts. These additional increases in the short positions occurred as prices rallied over $2.60 during May expiration, and the rally continued into early last week as June took over as prompt. The speculative sector is clearly expecting a test of the June lows from last month at $2.477 and perhaps more declines beyond that level.
- Market internals maintain the slightly negative bias, with volume increasing from the previous week and open interest increasing as the prices rebuffed the gains. The market has softened from the oversold momentum levels obtained during the price declines at the end of last month.
- Prices are continuing in the recent range and following a pattern similar to last year’s, but at lower levels. Early projections of supply growth have the market above 3.5 Tcf at the end of the injection season, based on normal summer demand. It is unlikely this market will see a dramatic move in either direction until the summer demand is better defined. Declines to last month’s low of around $2.43 will find support, and the highs of around $2.65-$2.733 will find sellers. Watching the deferred strips and their price behavior will give a clue as to the near-term direction of this market. If the market breaks below the lows of last month, look for confirmation in the winter strip.
NATURAL GAS LIQUIDS
- Ethane gained slightly week-over-week, increasing $0.002 to $0.237. All other purity products saw declines in price, with propane falling $0.041 to $0.603, normal butane down $0.072 to $0.698, isobutane down $0.059 to $0.710, and natural gasoline down $0.054 to $1.287.
- US propane stocks increased ~1.2 MMBbl the week ending April 26. Stocks now sit at 58.9 MMBbl, roughly 22.6 MMBbl and 19.3 MMBbl higher than the same week for April 2018 and April 2017, respectively.
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- Waterborne crude imports dropped substantially from last week, with data from manifests indicating a drop of more than 1.4 MMBbl/d across the country. PADD 3 saw the biggest drop, falling by nearly 800 MBbl/d week-over-week to 1.436 MMBbl/d. PADD 1 fell to 618 MBbl/d, while PADD 5 fell to 868 MBbl/d. Last week’s bump in PADD 3 imports was driven by higher-than-normal imports from Colombia, Kuwait, and Russia. Imports from those countries fell this week, but imports from Mexico rose to nearly 740 MBbl/d. That represented more than half of overall PADD 3 waterborne imports. Houston took in more than 35% of total imports to PADD 3.
- Imports from Nigeria have increased slightly, with overall imports from that country reaching the highest since January. The majority of these barrels went to PADD 1, with Phillips 66 Bayway taking the most. However, Valero Texas City did receive a cargo of medium sweet Bonga.