Last night's surprisingly large inventory build reported by API [5] (+2.9mm vs expectations of -2.5mm) sent hopeful crude prices reeling (not helped by comments from Iran and Saudi this morning). Following last week's huge 5.9mm draw, DOE reports a 2.63mm build (confirming API's data). Cushing (which API reported as a 923k build) also saw DOE report a 0.9mm barrel build (pushing closer to its limits). As we have detailed previously, December typically sees major drawdowns in inventory as energy firms attempt to minimize tax burdens into year-end. December 2015 has seen a notably lower-than-expected drawdown.
- *CRUDE OIL INVENTORIES ROSE 2.63 MLN BARRELS, EIA SAYS
Total crude inventory rose notably in the last week - very much against the seasonals. This is the month when drawdowns are supposed to be the largest.
Cushing inventory rose once again:
- CUSHING CRUDE INVENTORIES RISE TO RECORD 63M BBL, EIA SAYS
[6]
Crude production has been "steadily rising" for the last few weeks...not what they need at all!
[7]
WTI Crude prices rallied up to $38 - the scene of the crime before a huge build 2 weeks ago sent prices falling - then tumbled overnight after API. The DOE data has comfirmed that build and losses are extending...
[8]
* * *
Finally, do not forget - December ALWAYS see notably drawdowns [9] as firms lighten up inventories on their balance sheet ahead of year-end to reduce tax burdens...
[10]
And judging from history, as Bloomberg notes [9], 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
