woensdag 12 juli 2017

WTI Slips As Inventories Draw But Production Hits New Cycle High

WTI has extended gains (on weaker dollar) from last night's 'bullish' API data in a deja-vu of last week, and DOE data (showing large draws in Crude and Gasoline) confirmed continued rebalancing. However, once again mimiccing last week's action, prices were not exuberant as another surge in production - to new cycle highs - stymied some of the excitiment. API:
- Crude -8.133mm (-2.45mm exp) biggest draw since Sept 2016
- Cushing -2.028mm - biggest draw since Feb 2014
- Gasoline -801k (-534k exp)
- Distillates +2.079mm
DOE;
- Crude -7.564mm (-2.3mm exp) - biggest draw since Sept 16
- Cushing-1.948mm - biggest draw since Feb 14
- Gasoline -1.697mm (-682k exp)
- Distillates +3.131mm (+728k exp)
The question heading into this week was whether last week's bigger than expected draw was a one-off, or the start of rebalancing. This week, we get some answers and it seems like the rebalancing is continuing...


The EIA posted a draw of -2.6 million barrels of crude from the SPR last week, the largest since 2011. Unless they were exported, these barrels will end up in commercial inventories the EIA reports this week. Cushing inventories are now at their lowest since Nov 2015...


U.S. crude exports rose almost 20 percent last week to 918,000 barrels a day, the highest since the week ended May 26...


Rig counts rose once again this week, and while EIA cut its 2018 production outlook, this week saw the effect of field maintenance in Alaska and Tropical Storm Cindy in the Gulf of Mexico fall away and production surged once again this week, to new cycle highs...


This is the highest production for the Lower 48 since July 2015 and we suspect the highest Shale production ever. according to the latest EIA Daily Prodctivity Report forecast released today, in July total shale basin output is expected to rise by 127kb/d in one month, hitting 5.475 mmb/d, and surpassing the previous record of 5.46 mmb/d reached in March 2015. The market's reaction for now appears very deva-vu all over again...


As Bloomberg notes, these headline inventory moves are close enough to the numbers published yesterday by the API to continue to support the price rise we saw after that first data release. Much of the bullish reaction had already been seen after the API data, so the upside from the EIA numbers may be limited. And it appears the same pattern is playing out again...


And here's the punchline, which we suspect is affecting the downward pressure on prices: the U.S. exported 149 million more barrels of crude and refined products in the four months through June than it did in the same period of 2016. This was the biggest growth in U.S. crude exports in barrel terms in living memory, some 1.255mb/d year over year....