US crude oil stocks decreased by 0.2 MMBbl last week, alongside gasoline and distillate withdrawals of 3.1 MMBbl and 4.2 MMBbl respectively. Yesterday afternoon, API had reported a crude oil withdrawal of 0.5 MMBbl, alongside gasoline and distillate withdrawals of 3.9 MMBbl and 4.1 MMBbl respectively. Analysts on the contrary, had expected a crude oil build of 3.0 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a large decrease of 7.8 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.
US production was estimated to be up 21 MBbl/d from last week per EIA’s estimate. Imports were down 745 MBbl/d last week to an average of 7.4 MMBbl/d. Refinery inputs averaged 15.5 MMBbl/d (20 MBbl/d less than last week), leading to a utilization rate of 85.1%. The petroleum stocks report is bullish, due to the withdrawals in crude and total petroleum inventories. WTI prices are up $0.76/Bbl, trading at $48.48/Bbl at the time of writing.
On Tuesday, WTI prices fell to $47.72/Bbl, a three-month low. This was the seventh daily decline in a row, the longest losing streak since January 2016. During this streak, prices dropped below the 200-day moving average ($48.68/Bbl). The lower prices were triggered by the inability of the OPEC quotas to have a meaningful impact on the high inventory levels globally. The speculative long positions started liquidating their record long positions in crude as they grew impatient waiting for higher prices. OPEC released its Monthly Oil Market Report on Tuesday, with its secondary sources estimates showing production down 139.5 MBbl/d in February from the month prior. Although the secondary source numbers showed another decline in Saudi Arabia’s production (of 68.1 MBbl/d), the direct communication showed Saudi Arabia had increased production from the prior month by 263.3 MBbl/d. The EIA’s report was released earlier today, showing February supply increasing 259 MBbl/d from the month prior. Due to the higher supply level and the 1Q2017 demand being revised downwards, the report now signals a 173 MBbl/d supply deficit, much lower than the level needed to normalize stocks back to levels from prior to the price crash. Drillinginfo expect rallies to be sold, unlike the mantra since December 2016 of buying all dips near $50/Bbl. In the coming weeks, WTI prices will form a new range with the high side of the range around $51/Bbl and the low end of the range is yet to be determined. The initial targets for the low end of the range will come from the lows of November 2016, prior to the OPEC cuts ($44.82-$44.20/Bbl).
Please find the updated Drillinginfo charts on the link below:
Petroleum Stocks Chart