WTI/RBOB Surge After Massive Gasoline Draw (Despite Record Crude Glut)

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Following API’s reported massive build in crude (and draw in gasoline), DOE confirmed the extreme moves with a major 8.2mm crude build and a massive 6.56mm draw in gasoline (the biggest since April 2011). US Crude production rose once again – to 13-month-highs.

API

  • Crude +11.6mm (+1.4mm exp)
  • Cushing +788k
  • Gasoline -5.00mm
  • Distillates -2.9mm

DOE

  • Crude +8.21mm (+2mm exp)
  • Cushing +867k (+406k exp)
  • Gasoline -6.56mm (-1.99mm exp)
  • Distillates -925k (-1mm exp)

This is the 9th weekly rise in crude inventories (some chatter on API data including SPR barrels but that was marginal at best compared to the headline print)…The gasoline draw is the biggest since April 2011

 

Notably West Coast (PADD 5) CRUDE STOCKS INCREASE 4.65M BBL, MOST SINCE OCT. 1999 ..

Bloomberg’s Bert Glibert notes that based on bill of lading data, the biggest sources of waterborne barrels to PADD 5 last week were Ecuadorian Napo and Kuwait Crude oil.

This is a new record high for US crude inventories…“Inventory drawdown slower than I thought after cuts,” Saudi Arabia’s Khalid Al-Falih admits.

 

Putting the 2017 surge in context, commercial crude stocks are now up 49 million barrels YTD, compared to 38 million in 2016 and a 22MM average over the past decade according to Reuters.

In the last week, oil imports accelerated to 8.15MMbpd from 7.6MMbpd the week before.

However, offsetting the spike in crude imports, gasoline imports fell to the lowest level since 1999.

Meanwhile, US crude production continues to trend higher with lagged rig counts, even as Saudi oil minister Khalid Al-Falih had complained that “the green shoots in the U.S. are growing too fast.” In the latest week, US Crude production rose by another +56k b/d, or +0.6% W/W to 9.088MMbpd

This means that US oil production, which is again rapidly rising on leaner, more efficient production technologies, is now just 5.5% below its lifetime high, a level it will surely overtake rapidly should the price of crude not tumble from current levels.

And as a reminder, the EIA published another bullish outlook for U.S. oil production in yesterday’s Short-Term Energy Outlook. It raised the 2017 year-on-year increase in crude and condensate production to 330,000 b/d from its previous assessment of just 100,000 b/d and now sees output above 10 million barrels a day by the end of 2018. Rebalancing the market is getting more difficult.

 

Notably the RBOB bounce (on API inventory draw) had been largely erased before the DOE data (and WTI had extended losses)…but the better than API crude build and huge gasoline draw triggered panic buying…

Bloomberg’s Vince Piazza warns U.S. inventories across the product value chain remain elevated, with crude oil 39% above the five- year average and distillates, jet fuel and gasoline between 5.5% and 22% higher. This, along with the 51% rebound in rig count since last year, and the robust level of more than 5,300 DUCs (drilled yet uncompleted wells) implies the near-term return of U.S. hydrocarbon volume with an environment of lower range-bound prices.

It appears traders are starting to realize…