WTI Drops Back Below $50 After Bigger Than Expected Crude Build

Oil clung to a gain today, bouncing back from a one-year low even as Russia kept OPEC+ waiting on a decision about whether to cut production in response to the coronavirus outbreak. Additionally, the Energy Information Administration cut its global petroleum demand growth outlook by 23% to 1.03 million barrel a day, citing partial effects from the coronavirus in its monthly Short-Term Energy Outlook.

“OPEC+ needs to balance production with the demand trajectory, which looks down,” Frances Hudson, global thematic strategist at Aberdeen Standard Investments, writes in an email.

“If a decision is not taken until the next scheduled meeting in March, I would expect this to limit the scope for what can be achieved.”

WTI still ended back below $50 however, with all eyes now on inventories...

API

  • Crude +6.0mm (+3.0mm exp)

  • Cushing +1.3mm (+2.3mm exp)

  • Gasoline +1.1mm +500k exp)

  • Distillates -2.3mm (-600k exp)

The third weekly crude build in a row won't help the bull case...

Source: Bloomberg

WTI hovered around $50 the figure ahead of the API print but slid below after the data...

Brent crude for April settlement rose 74 cents to settle as $54.01 a barrel on the ICE Futures Europe exchange in London, putting its premium over WTI at $3.84, the smallest spread between the two contracts since early 2018.

“There’s a new calculus for importers, particularly Mediterranean and Asian buyers who were happy to take U.S. barrels when they were $6 dollars cheaper, now it’s only $3 less,” said Bob Yawger, futures director at Mizuho Securities USA.

As Bloomberg reports, the exact impact of the virus has been difficult to quantify, so analysts have narrowed in on other demand indicators for clues. Morgan Stanley cut its oil demand growth forecast for 2020 by 15% amid plunging passenger transport volumes. Chinese refined product demand is seen down around 1.2 million barrels a day in the first quarter compared with same quarter last year, according to IHS Markit.