WTI Rebounds On Product Inventory Draws; Gas Pump-Prices On The Rise Again

Oil prices are down modestly overnight as Chinese demand anxiety (and an unexpected build reported by API) outweighs the increased rhetoric towards energy supply constraints by Putin (amid complaints by EU leaders of ‘blackmail’..

“The China story continues to be lackluster as further worries about COVID lockdowns have spread to Beijing. Shanghai has continued to face scaling lockdowns by district while Beijing has also begun to see mass testing commence with indication that further restrictions to curb case counts are inevitable,” RBC Capital Markets said in a report.

Bloomberg Intelligence’s Senior Oil & Gas Analyst Fernando Valle notes: “Lockdowns in China are weighing on Brent and WTI crude-oil prices, while the spread between the two grades may widen as the Strategic Petroleum Reserve is poised to release around 1 million barrels a day over the next six months. That could lead to a glut of light crude, which will need to be exported, and this may weigh on land-locked WTI Cushing. Meanwhile, Russia’s exports and production are starting to show the impact of financial sanctions, and are falling at a faster pace than previously anticipated.”

All eyes for now on signs of any demand destruction domestically as retail gasoline prices start rising again, despite Biden’s cunning SPR plan.

API

Crude +4.78mm (+600k exp)

Cushing +1.143mm

Gasoline -3.91mm (+100k exp)

Distillates +400k (-100k exp)

DOE

Crude +691k (+600k exp)

Cushing +1.298mm

Gasoline -1.573mm (+100k exp)

Distillates -1.449mm (-100k exp)

Products saw inventory draws for the 3rd straight week as Crude stocks rose (albeit modestly)…

Source: Bloomberg

Stocks at Cushing rose to the highest since February, thanks to a large 1.3m bbl gain in holdings.

Market experts are expecting volumes to grow steadily from here largely because of SPR releases.

The headline build in crude stockpiles was more than offset by the withdrawal of more than 2.9 million barrels of crude from the Strategic Petroleum Reserve last week. Total nationwide crude inventories (including commercial stockpiles and oil held in the SPR) fell by 2.2 million barrels in the week to April 22. That’s 33 straight weeks of crude draws from the SPR and there’s going to be many more of them to come.

Leaving overall crude stocks (ex-SPR) near multi-year lows

Source: Bloomberg

Gasoline inventories in New England fell to their lowest since 1991…

Source: Bloomberg

US crude production holds near two year highs…

Source: Bloomberg

WTI was hovering just above $100 ahead of the official data and pushed higher after the smaller-than-API crude build…

Bad news for Biden is that retail gas prices are on the rise once again…

Source: Bloomberg

Notably, Diesel futures trading in New York surged to the highest level in records going back to 1986 as global demand for the fuel remains robust in the wake of Russia’s invasion of Ukraine.

Record futures also shifted the prompt month spread into the widest backwardation on record, at 65.06 cents per gallon. The bullish structure indicates the relative strength in immediate deliveries against next-month prices as physical demand trumps all speculative positioning.