WTI Algos Uncertain After Gasoline Inventories Draw But Crude Production Surges

Tyler Durden's picture

WTI crude prices managed to scramble back up to pre-API-tumble levels ahead of DOE's data dump this morning with all eyes on gasoline inventories, which did not disappoint showing a small draw (in line with expectations) along with crude's draw which was roughly in line with API and expectations. Production continues to rise to highest since July 2015.

 

API

  • Crude -3.595mm (-3.5mm exp)
  • Cushing -462k (+300k exp)
  • Gasoline +1.402mm (-1mm exp)
  • Distillates +2.048mm

DOE

  • Crude -3.33mm (-3.5mm exp)
  • Cushing -503k (+300k exp)
  • Gasoline -1.22mm (-1.25mm exp)
  • Distillates +28k

Builds in products (gasoline and distillates) according to API is weighing on markets (and a big shift from last week's massive crude draw), but DOE data showed a draw for gasoline (in line with expectations) and a draw for crude (in line with expectations)

Total Crude Oil Inventories dropped to the lowest since Jan 2016... But as is very clear, remains dramatically over-stocked relative to pre-2015 norms...

One crucial data point that Bloomberg's Javier Blas notes: total U.S. oil stocks (which includes crude, refined products and the volatile "other oils" category) were unchanged last week. That's not what the bulls need.

Amid all the bluster, we found it ironic that Crude imports from Venezuela climbed 52 percent to 987,000 barrels a day, also the most since April.

U.S. Fuel Demand Fell 0.72% in Past Four Weeks

Despite stabilization in rig counts, US crude production continues to trend higher, jumping to its highest since July 2015 last week...

 

A weak dollar and some BTFDing in stocks managed to scramble WTI up to the pre-API levels ahead of the DOE data... (NOTE: futures puked a little right before the print). After the data, the machines were confused but the trend for now is higher as $48 stops are run...

But its mostly noise as the algos cant decide which way to trend for now.

Bloomberg Intelligence energy analyst Vince Piazza sums up the mixed picture:

The crude stockpile drop was basically in line with mean estimates.

 

The net draw across the petroleum value chain is a modest positive.

 

However, a drop in refinery utilization foretells ebbing of demand, as driving season comes to an end.

 

The bearish view is reinforced by output above 9.5 million barrels a day and pushing higher, based on management commentary from 2Q earnings calls.

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NoWayJose's picture

The guy that gets paid to manipulate the data must be on vacation this week - otherwise no one can explain the Yuuuge difference in gasoline draws!

The DOE numbers are quite bullish.

NEOCON1's picture

Let them drink gas! It's cheaper than Cocoa-Cola.

adr's picture

You really believe inventories have gone down? With record production. 

The draws are bullshit to goose algos into bidding oil back to $50. 

I find it funny that oil doubled in price during a time where inventories never went below the level that caused oil to drop from $90 to $26.

Actually I don't find it funny. It fucking pisses me off to the point that I'd hack the head off anyone who caused the price to skyrocket. Because, not only was the move insane, but it also nearly doubled gasoline prices and gabe us gas priced like $90. So to the end consumer, oil prices being cut in half doesn't mean a damn thing. 

There's Hitler and then there's commodity speculators. Hitler caused far less damage to the world than the commodity speculators have done over the past 20 years. 

NoWayJose's picture

Oil will go up when the speculators say it will go up! The only thing for certain is that the guys running the Strategic Petroleum Reserve will buy when oil hits $140 and sell when oil hits $30!

oak's picture

the confusion will be cleared in two hours. the huge supply is still there and the demand is not there. the money would be made on the short side in next two months.

BritBob's picture

Falklands oil and Argentinian pretensions ...

By a ruling of the UN, Argentina will extend its maritime platform (Politica Argentina) ; New map of the maritime platform reaffirms the sovereignty of Malvinas with UN endorsement (ElCronista); Argentina enlarges its territory 35%, with a UN endorsement ...(La Capital).   To add to this euphoric atmosphere the Argentine Foreign Minister stated,  ''This is a historic opportunity for Argentina. We have taken a great step in the demarcation of the outer limit of our continental shelf; the most extensive boundary of Argentina and our border with humanity,'' Foreign Minister Susana Malcorra ...

What is the truth?

Argentina's Continental Shelf Claims and The UN CLCA Commission (1 page):-

 

https://www.academia.edu/33898951/Argentinas_Continental_Shelf_Claims_-The_UN_CLCS_Commission

Cloud9.5's picture

A few million did drive to see the eclipse. 

Sapere aude's picture

"Despite stabilization in rig counts, US crude production continues to trend higher, jumping to its highest since July 2015 last week..."

 

Of course that is absolute bullshit.

With shales its not only bullshit, its provable bullshit as the geology of shales being tight means that in order to extract oil or gas, a horizontal well has to be used, because instead of a vertical well that may intersect a formation of just a few feet by drilling laterals horizontally into the formation, it increases the surface area to extract so much more than a conventional well, after significant fraccing has taken place along the horizontals to ensure that sufficient proppants are kept in place to literally prop open the fissures created by fraccing, thus releasing oil or gas over the length of the horizontal rather than just the small intersect in a conventional or deviated conventional well.

The downside of that is that by increasing the surface area for oil or gas gathering by several hundred percent, you also drain the oil/or gas several hundred per cent faster than in a conventional or deviated well, hence the massive decline rates in shales, including the Permian.

These declines rates mean its geologically impossible for the US to state its production is increasing, when the number of legacy wells mean so many new wells have to be drilled just to make up the significant losses in the legacy wells.

That is Red Queen Syndrome.

I've mentioned this so many times before but apparently few want to believe it, even though its true.

If you drill 1,000 wells with their initial rate of 1,000bopd, you have peak production of 1,000,000bbls a day, within six months you lose approximately 50% from the peak through declines, so six months, and its worse than that because this doesn't just start at six months, it starts to decline within a month of initial peak.

But even if you forget the compound decline, within six months those 1,000 wells producing 1,000,000 are now only producing 500,000bopd, and require another 500 wells to bring them back to the 1,000,000bbls a day peak, but from that day, you have further declines in the legacy wells, and larger declines in the newer 500 wells.

By the end of the year, the original 1,000wells are down to 350bopd each, so 350,000bopd from the original 1,000,000bopd, and the extra 500 wells that produced 1,000bopd are now down to 500wells, so what do you have to do...DRILL EVEN MORE WELLS AD INFINITUM. But its not even to increase production....its just to try to maintain it. 

So even with the extra 500 wells, the production has still dropped by 350,000+250,000=600,000bopd, so 400,000bopd short even with the extra 500bopd.

It becomes impossible to even maintain production, as the number of wells you have to drill becomes a noose that cannot be untied.

Then on top of that you have the proven feature that occurs in these shale plays, outside of general decline rates, you have saturation factors and sweet spots.

The first wells to be drilled are always the sweet spots, and as time goes by you are drilling further and further away from the sweet spots, so production drops anyway, but still has the legacy problem of massive decline rates.

Then you have the other factor, that has been seen in the Bakken and the Eagle Ford....saturation point.

As more and more wells are tucked into pad drilling, the acreage reduces and eventually it gets so tight that drilling a well, not only means a much smaller output on that well, but it decreases output on all the other wells in the vicinity.

Shale is bust, so this idea of increased production is simply fake news.

Look at the comments about the Permian a few days ago on this site, where at last some companies are acknowledging the Permian (just like the Eagle Ford, the Bakken and the Marcellus) are not what they were fracced up to be...declining outputs, failed wells, and in any event none of them making anywhere near a profit at $50, let alone the $30 some of the big mouth CEO's talk, but where their accounts just don't walk the walk.