Crude Spikes Higher As API Reports Large Inventory Draw

Tyler Durden's picture




 

For the last week of December - typically a month when inventories are drawn down dramatically to avoid year-end tax-burdens - API reports a huge 5.6 million barrel inventory draw (massively bigger than expectations of a 488k build). It would appear, after 3 mixed weeks, that energy firms waited for the very last week to dump inventories into year-end (as seasonally occurs). Of course the transit of the first post-export-ban tanker may have also helped. While WTI spiked higher it is fading a little as Cushing reported a very large build of 1.4mm barrels (the 9th week in a row).

Crude inventories dropped dramatically uin the last week of December (as is usual at this time of year)...

 

However, there have now been 9 weeks of builds in Cushing inventory in a row (with today's 1.4mm build) as Genscape warned earlier that storage levels are getting extremely full.

 

And after falling all day, Crude spiked higher on the news...but gave some back as traders remembered the seasonals....

 

*  *  *

Finally, do not forget - December ALWAYS see notably drawdowns as firms lighten up inventories on their balance sheet ahead of year-end to reduce tax burdens...

 

And judging from history, as Bloomberg notes, it should resume as soon as the festive season is over: Stocks have built by 3.2 million barrels on average in January since 1921.

 

 

Charts: Bloomberg

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Tue, 01/05/2016 - 16:45 | 7001725 FreeShitter
FreeShitter's picture

Wake me up when it hits 45+

Tue, 01/05/2016 - 16:50 | 7001743 buzzsaw99
buzzsaw99's picture

as a freeshitter shouldn't that read: wake me when it's free bitchez! ??

Tue, 01/05/2016 - 19:02 | 7002244 venturen
venturen's picture

will hit $30 before $45

Tue, 01/05/2016 - 16:47 | 7001734 buzzsaw99
buzzsaw99's picture

they reverse repoed that oil onto janet's balance sheet bitchez

Tue, 01/05/2016 - 16:53 | 7001757 Ace in the hole
Ace in the hole's picture

Refiners wanted low inventories for LIFO, so they hold tankers out until Jan 1.  Those tankers will come in, and discharge, and inventories will keep building.  There is too much oil in the world, and producers are still cranking it out.

Tue, 01/05/2016 - 16:56 | 7001774 OutaTime43
OutaTime43's picture

The "glut" is equivalent to about 3-4 days of world consumption.  Just to put this "massive" inventory rise in a little perspective. When oil prices snap back after 20% of world capacity is cut, it will be violent.

Tue, 01/05/2016 - 17:02 | 7001798 buzzsaw99
buzzsaw99's picture

i remember the crash of the 1980s. the price was cut in half and stayed there for fifteen years.

Tue, 01/05/2016 - 18:20 | 7002069 OutaTime43
OutaTime43's picture

That was when oil extraction rates had nowhere to go but up. Lower population, plenty of oil in the ground.  Today, we have a limit backed by the inflexible science called geology. Saudi's have peaked. Every indication including their desperate actions recently geopolitically prove this fact.  Imagine a scenario whereby 20% of drilling capacity is cut due to this temporary "glut" followed by a major war or insurgency inside Saudi Arabia itself...   where do you think prices will go?

Tue, 01/05/2016 - 21:18 | 7002770 sun tzu
sun tzu's picture

Lower population, plenty of oil in the ground. 

You're saying the population wasn't growing at the same rate back then? LOL

 

Today, we have a limit backed by the inflexible science called geology.

That limit didn't exist before the 1980's?

 

Saudi's have peaked.

Same claims since the 1970's

 

Every indication including their desperate actions recently geopolitically prove this fact.

Which indications and how does pumping more oil indicate they have less oil?

 

Imagine a scenario whereby 20% of drilling capacity is cut due to this temporary "glut" followed by a major war or insurgency inside Saudi Arabia itself

You admit that the only chance for higher oil prices is a major war in the Middle East. With a world economy in recession, what happens to demand if energy prices double? Can you say depression? What happens to demand in a global depression when fewer goods are produced and shipped and fewer people can afford to travel or even take a trip to the mall?

Tue, 01/05/2016 - 21:20 | 7002778 sun tzu
sun tzu's picture

Let me know when the entire world stops pumping oil for 3-4 days so that glut goes away. 

Tue, 01/05/2016 - 17:03 | 7001801 Gregory Poonsores
Gregory Poonsores's picture

I love how the ZH spikes and plunges these days are like 30 cents.

Tue, 01/05/2016 - 18:34 | 7002125 Baby Eating Dingo22
Baby Eating Dingo22's picture

Maury Povich took over this site about 11 months ago

 

Tue, 01/05/2016 - 17:16 | 7001836 falga
falga's picture

This crude draw is totally overshadowed by the large distillate build of +5.6 Mil Barrels as well as Gasoline at +7.2 Mil Barrels.... this is not good for crude as it will hit crack margins!  US crack margins at almost $15/barrel!!!

Tue, 01/05/2016 - 17:18 | 7001840 Peak Finance
Peak Finance's picture

Sooo, going to be an interesting few weeks?

I think Tyler reported eariler that Oil is coming INTO Cushing, but not going OUT of cushing due to storm and flood damage to some pipelines and railways? 

With year end dressing and weather problems there could be a huge Cushing head-fake build due, then a huge draw when everything is fixed? 

I thought I saw a nice swing trade in oil today and (rightly so) decided not to trade today.  Will wait for the next big Cushing build then buy some UWTI and USO

 

 

Tue, 01/05/2016 - 18:26 | 7002088 Francis Marx
Francis Marx's picture

All I know is the whole thing is rigged. I kind of figured a big draw was in order. There was no attempt to ramp during the day.  They have insiders in the API.  I went long down at 36.  I play their rigged game to gain. Been working good.  They ramped it to close above support on the 60 minute.

Tue, 01/05/2016 - 19:11 | 7002299 kaboomnomic
kaboomnomic's picture

Well.. How nice! Everytime oil touch new low handle? Report coming out from US govt about big withdrawal?? And you think only China rigged their data?? Uhuh...

The only thing i observed:

1. Isn't ZH own article, a couple days ago said, NO REDUCE Output from DEAD US SHALE WELLS??

2. I saw report on RT that Russia pumping oils like crazy, Right into the last week of 2015.

3. Saudi said they don't reduce their output.

4. Does Iran stop pumping oils after sanctions lifted??

Just by observing the above? Hell.. i surprised oils haven't below 30$ yet.

But... it's coming alright..

Tue, 01/05/2016 - 19:31 | 7002366 Hohum
Hohum's picture

It will be production level year over year, imports up, inventories up.  Now how do we get inventories down?

Tue, 01/05/2016 - 19:34 | 7002374 Early Retirement
Early Retirement's picture

Despite Imports being down over 3 MM bbls, total crude + product  stocks rose over 7 MM bbls. Demand must have cratered.

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