WTI Holds Losses Below $50 After Bigger-Than-Expected Crude Build

Oil prices plunged to one-year lows, with WTI back below $50 for the first time since Jan 2019 as global demand concerns trumped OPEC+ jawboning that they could do something to stall the decline.

“We’re getting close to the bottom and it’s clear OPEC is not going to sit on their hands,” said Phil Flynn, an analyst at Price Futures Group Inc.

“There’s some dire predictions being priced in right now.“

As Bloomberg reports, the deadly virus has menaced markets by upending trade flows and is estimated to have cut 20% from China’s oil demand as quarantined cities and closed factories cripple industrial activity in the second largest economy in the world. Refineries are curbing operations, while the nation’s top processor is trying to resell millions of barrels of crude it no longer needs.

“How much OPEC decides to cut production will be a deciding factor for price stabilization,” said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB.

But for now, the machines will focus on inventories...

API

  • Crude +4.18mm (+3mm exp)

  • Cushing +960k

  • Gasoline +1.96mm (+1.8mm exp)

  • Distillates -1.78mm (-200k exp)

After a surprise build in the previous week, analysts expected another sizable build for crude and API reported a bigger than expected 4.,18mm build (and another build for gasoline stocks)...

Source: Bloomberg

Investors will be keenly focused on refinery utilization, says Andrew Lebow, senior partner at Commodity Research Group. “Refiners are beginning maintenance, which is why we can expect to see an inventory build.”

Ahead of the API print, WTI was trading around $49.60 and dipped modestly lower on the data...

But for now the $50 line in the sand is what matters...

“WTI is trying to hold on to that $50 support level,” says Olivier Jakob, analyst at Petromatrix.

“But it’s going to be difficult unless OPEC takes decisive action, otherwise we’ll get to the lows of 2018.”

And finally, we note that the front-end time-spreads for Brent have flipped negative once again...

Not a good signal for the recovery of China.