WTI Slips As Inventories Draw But Production Hits New Cycle High

Tyler Durden's picture

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.
 

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Turin Turambar's picture

It's all manipulated BS.  OPEC has learned to jawbone and minipulate from the best... central banks, especially the Fed.

Schmuck Raker's picture

Actually, OPEC appears to suck at it. Maybe installing a few GS alumni as CEOs of their NOCs would help.

Last of the Middle Class's picture

You want crude back? Kill of Obamacare and let market forces take over the insurance, pharma and healthcare industries.

FrozenGoodz's picture

Uhh ... yea ... that'd do it ... sure

directaction's picture

I agree.
That'll fix climate change and stop war, too. Great idea. 

post turtle saver's picture

crude is already "back"... back to where it fucking belongs...

you will not see $120 USD/bbl again for a loooooooooong time...

Horse Pizzle's picture

If Saudi Arabia would announce the giant Ghawar oil field is dry that might boost oil prices.

Pasadena Phil's picture

Tyler, your model is broken. You need to factor in those burgeoning exports which are growing exponentially for US shale. Maybe the "glut" that is going into storage is foreign expensive OPEC and Big Oil crude being crammed down their throats? The US is on its way to becoming not only energy independent but oil dominant. All we have to do is keep producing more and more shale for export.

post turtle saver's picture

you will never get an admission on this site that oil is _still expensive_ vs. historical pricing and can still go down as easily as it can go up... you will also never get an admission here that US shale tech is running the show now, even though it's plainly obvious that it is...

bunkers's picture

Whatever the short term WTI, Brent, etc, know the long term is sky high because they are all about Quiet Depopulation. Investments aside, have an alternative source of heat like wood, solar, wind etc. DIY is much less expensive. CYA.

Adapt 2030 on YouTube says we are entering the Grand Solar Minimum so solar may not be the way to go. He expects less sun and cooler temperatures until 2035.

Sapere aude's picture

postturtle. Of of course you won't because its not true. You are use a fixed price mechanism without taking into consideration world oil usage growth!

Why not compare it to when oil wasn't used at all...it had little/no value...Now the world uses approximately 96,000,000barrels of the stuff a day, and so short was the supply that previously they didn't include sour oil, it didn't include tar sands, it didn't include offshore, it didn't include shales, it didn't include enhanced oil recovery techniques and it didn't include driling in some of the harshest environments on earth.....done just to eek out a little bit more from the declining amount of oil remaining.

The Saudi's overstate their reserves and their production at the whim of the U.S. the wikileaks leaked cables proved it.

Apart from that Saudi own use of oil will soon exceed what it can produce!!

Its super giant oilfields that have propped up the world oil supply are dwindling, we are not finding super giant oil fields any more and in fact we are hardly finding ANY oilfields any more compared to the dramatic use of oil.

Capex has been slashed by record levels and you have to produce 8%-12% more on conventional wells just to make up for depletion. 

89,000,000bbls are produced daily from conventional wells, which means depletion at a mean 10% is 8,900,000bbls daily if capex is not poured into the system.

For shale its much worse, 4,000,000bbls a day alleged production, with a staggering decline rate of 60-70% in the first year.

So that 4,000,000 is reduced by 2,600,000bbls  reducing that 4,000,000 to just 1,400,000bbls a day of loss making oil.

 

The reason we have electric vehicles and all the false climate data is because we are perilously close to failing oil supplies and the strategy applied by the West is about the worst strategy you could employ as low cost oil when its depleting so rapidly will do nothing to protect the world that relies on oil and will do for another 20 years.

 

Sapere aude's picture

Pasadena. Those oil exports you talk of....they are like the dodgy paper gold. they simply don't cut it, don't exist.

 

Shale oil is too light and too dangerous to ship...it even blows up trains because its so volatile. Most shipping line would not even be allowed to load it on their tankers.

 

Have you not researched this.

 

This game the U.S. is playing copying Saudi overestimating reserves and exports, doesn't work, because imports show the U.S. needs more and more oil. It does not import it to export it and certainly not where you would import heavier oil that all refiners want, just to export ultra light ultra explosive condensate that few want, let alone what has cost twice as much as what they could export it for even if there was a market.

 

If it was that plentify take a look at CiA 2010 Joint Operating Environment report, showing how worried the U.S. is about even SUSTAINING oil supply for the military, let alone civil use. How they even spent $15 per LITRE making synthetic oil as they were so concerned at the world oil supply failing, which they know we are on the precipice of now.

 

They had two ways of playing it the right way and the wrong way! Guess which way they chose.

They were concerned about widespread panic and increased competition as oil supplies diminish which they are...if not please explain why we've had to add SOUR OIL, OFFSHORE OIL, ENHANCED OIL RECOVERY, TAR SANDS, SHALE to try to prop up supplies? Or why so many wars are still taking place about OIL or about petrodollars, or about oil/gas pipelines.

The strategy is propped up by a panic rush to Tesla, to EV's, renewables, to embrace climate change, etc., anything to try to convince others to reduce oil or demonise it rather than tell the truth that we are in deep trouble.

Obviously they don't want the everyone knowing its so precarious, panic buying, and countries competing even more for the dwindling oil supplies that even now are struggling to keep demand supplied, and contrary to the fairy stories about demand failure, its rubbish.

Ask people in Egypt how long they queue up for fuel, ask some peoples in Africa how often they have to use their generators for their meagre power supplies, ask people throughout the world who haven't had the luxury of the consumer world we have whether they want autos, washing machines, or even just water 24/7!

On a more local note, ask some residents about failing infrastructure, healthcare or where its perceived that America has forgotten them.

Ask how much its going to cost to rebuild Syria, Libya, Iraq, Yemen, or look at Venezuala's queues for fuel and anything else.

I'm not anti U.S. I'm pro U.S. but on this the strategy sucks!!! it Really does. Not one of the shale companies shows a profit, and if it were not for the Fed buying up their busted financing bonds, they would all be bust. They've all assisted over stating production, aided by the SPR that WAS DESIGNED TO BE BIDIRECTIONAL, and I was commenting for months and months about how the U.S. would BE FORCED at some stage to announce a sale of oil from the SPR?

WHY?

Because its the only way that they could get back to explaining why so much of the SPR is not there!!!

So it was logical that they would have to announce a sale of some of it, the sum required to balance the amount of oil that has already been used and claimed as additional U.S. production, and where in all likelihood the recipients of that oil, likely to be big oil would be the successful tenders in any sale of the SPR.....as they had it months ago anyway.