Oil Algos Confused Despite Bigger Than Expected Crude Build

WTI has extended losses overnight following API's surprise crude build and President Trump appearing to ease off the war rhetoric and Aramco's words have eased market fears.

“Saudi Aramco has so far shown great crisis-management skills and great resilience, keeping operations ongoing in the attacks’ aftermath and quickly mobilizing recovery and repair crews,” said Samuel Ciszuk, founding partner of consultants ELS Analysis in Stockholm.

However, inventories remain a key barometer.

API

  • Crude +592k (-2.5mm exp)

  • Cushing -846k

  • Gasoline +1.6mm (-500k exp)

  • Distillates +2.00mm (+500k exp)

DOE

  • Crude +1.06mm (-2.5mm exp)

  • Cushing -647k

  • Gasoline +781k (-500k exp)

  • Distillates =437k (+500k exp)

A surprise crude build last night from API was confirmed by DOE data which indicated a bigger build of 1.06mm barrels (along with builds in gasoline and distillates stocks)...

Source: Bloomberg

Crude production remains near record highs despite the ongoing decline in rig counts

Source: Bloomberg

WTI hovered just above $58.00 ahead of the DOE data - well down from the pre-API levels - but algos were confused on the DOE data's bigger build...

Finally, we note that Bloomberg Intelligence's Senior Energy Analyst Vince Piazza points out that:

The attack on the Saudi installations will push oil-market fundamentals to the back seat, allowing the elevated geopolitical risk to support crude prices. While retaliation is likely, a military intervention that drags allies into a broader conflict is less certain. Still, with key infrastructure now a target of terrorism, we believe a stronger risk premium on global benchmarks is warranted, even with the threat of a slowing global economy.

Uncertainty in the oil market is the highest we've seen since the Sept. 11 attacks in 2001.