WTI Flat After Another Crude Draw, Distillates Stocks At Seasonal Record Lows
Oil prices are flat this morning, reversing earlier gains that pushed Brent crude above $110 a barrel - 5 month highs (and WTI back above $101), as traders weighed a recovery in Middle East oil exports against persistent threats to shipping through the Strait of Hormuz and attacks targeting Saudi Arabia..
Specifically, shipping risks remained elevated as Iran's IRGC said Tuesday that two oil tankers caught fire after striking mines south of the Strait of Hormuz.
“High exports do not necessarily mean lower risks,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “Shipping remains exposed to attacks, while exceptionally high freight rates and insurance premiums make transporting oil expensive.”
Regional tensions also persisted.
The Saudi-led coalition said Wednesday that it intercepted drones launched toward the kingdom, including one targeting the Eastern Province, a major oil-producing region.
Diplomatic efforts to end the conflict are reportedly continuing. Qatar's Foreign Ministry said Tuesday that contacts, visits and exchanges of messages between Washington and Tehran remained ongoing, amid efforts to reopen the Strait of Hormuz and end the regional escalation.
With hurricane shut-in effects fading, API reported inventory draws across the board (except a small build at Cushing).
API
Crude -4.9mm
Cushing +936k
Gasoline -2.0mm
Distillates -2.6mm
DOE
Crude -3.06mm (-340k exp)
Cushing +987k
Gasoline -2.95mm
Distillates +1.68mm
Official US crude stocks drewdown for the 3rd straight week (more than expected but less than API). Cushing stocks rose for the 5th straight week while Gasoline inventories saw their biggest drawdown since May...
With IEA urging the world to release more barrels from reserves, the US Strategic Petroleum Reserve saw a small 300k barrel drain (after no change the prior week)...
Despite the build this week, distillates stocks remain at record lows for this time of year...
US Crude production fell once again (storm shut-ins)...
WTI was trading around $98 ahead of the official data and didn't move much on the print...
And much to Trump's chagrin, pump prices have never been higher at this time of year...
Finally, Bloomberg reports that there are signs that physical markets in some parts of the world are beginning to cool.
As flows through the Middle East rise, one key benchmark in the region has fallen to its weakest level in three months.
The “Gulf crude oil market has been pressured” by the availability of multiple cargoes at relatively short notice, said June Goh, oil analyst at Sparta Commodities SA.
At the same time, traders said high shipping costs mean American barrels aren’t traveling as far afield, pointing more supplies to Europe and pressuring the Dated Brent physical benchmark.