WTI Extends Losses After Smaller Than Expected Crude Draw

Oil prices extended their losses overnight after API reported a surprise crude build, and while stocks are rebounding on stimulus "optimism", WTI refuses to chase it as a resurgent COVID-19 and expanding Libyan supply are keeping oil in check.

Brent “remains stuck in the low $40s with the weaker dollar and the potential for a stimulus having no positive impact,” said Ole Hansen, head of commodities strategy at Saxo Bank. The market is focusing on inventories, and “overall it makes sense that crude is struggling while the demand outlook remains murky.”

API

  • Crude +584k (-1.9mm exp)

  • Cushing +1.174mm

  • Gasoline -1.622mm (1.6mm exp)

  • Distillates -5.938mm (-3.0mm exp)

DOE

  • Crude -1.002mm (-1.9mm exp)

  • Cushing +975k

  • Gasoline +1.895mm (1.6mm exp) - biggest build since May

  • Distillates -3.832mm (-3.0mm exp)

Official inventory data shows that crude stocks fell by a modest 1mm barrels last week (less than expected) but still a draw compared to API's build. Additionally, there was a noteworthy Gasoline build (the biggest since May)...

Source: Bloomberg

US crude production remains noisy due to the storm-driven shut-ins (most recently Hurricane Delta) and saw a 600k b/d drop last week...

Source: Bloomberg

WTI was hovering around $41 ahead of the official inventory data.

Bloomberg Intelligence Energy Analyst Fernando Valle concludes that "concerns over global trade and the ramp-up in coronavirus cases in Europe and the U.S. may continue to weigh on refiners. Crack spreads have dipped despite last week’s report of a massive drop in diesel inventories. The market may keep looking past short-term indicators until there’s more clarity on fiscal stimulus, and on whether a second virus wave will lead to further lockdowns.”