WTI Rebounds On Smaller-Than-Expected Crude Build, Production Cuts

Oil prices suddenly tumbled this morning after a five-day surge as it appears the surge in ADP unemployment data (completely expected) seemed to remind the machines of the persistent concern that the global glut will take a long time to eliminate as demand remains crushed by the coronavirus.

Most analysts don’t see demand rebounding to pre-virus levels for at least a year, with some questioning if that will ever happen. The risk of a second wave of infections in the U.S. as states reopen can’t be discounted, while deteriorating relations between Washington and Beijing may hamper the global economic recovery.

“We’ve gone on Brent from $20 to $32, that’s a lot,” said Tor Svelland, chief executive officer of commodities fund Svelland Capital.

“The demand destruction is still there, it’s a very, very strong move.”

And while initially last night's bigger-than-expected API-reported crude build was ignored, oil prices are losing steam fast this morning.


  • Crude +8.44mm (+7.1mm exp)

  • Cushing +2.681mm

  • Gasoline -2.237mm (-400k exp)

  • Distillates +6.143mm (+3.5mm exp)


  • Crude +4.59mm (+7.1mm exp, +9.51mm WHIS)

  • Cushing +2.068mm

  • Gasoline -3.158mm (-400k exp)

  • Distillates +9.518mm (+3.5mm exp) - biggest build since Jan 2019

This is the 15th straight week of crude inventory builds but notably less than expected (and lower than API's print). It appears the bulls are choosng to ignore the huge build in distillates (think perhaps airlines)

Source: Bloomberg

Easing of stay-at-home orders in parts of the U.S. is driving increased gasoline demand, but the outlook over the medium term is still poor.

Source: Bloomberg

The overall crude inventory is back very close to record highs...

Source: Bloomberg

The recent collapse in US oil rig counts has started to sync with a plunge in US crude production (which fell 200k b/d in the last week).

Source: Bloomberg

WTI tumbled back to around $23.50 ahead of the DOE print and ripped back higher (though still down on the day) after the smaller than expected build... We will see if this spike holds...

Bloomberg Intelligence Senior Energy Analyst Vince Piazza notes that while announcements by E&Ps curtailing drilling and completions activity and shutting-in oil production are providing a near-term boost to sentiment, themes of lost demand and storage builds remain key concerns to us still. Reopening the global economy is a slow and arduous process, and a wave of infections in autumn may recast assessments of demand and supply balances.