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WTI Surges Above $63 Despite Surprise Crude Build, Plunge In Gasoline Demand

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by Tyler Durden
Wednesday, Feb 24, 2021 - 10:37 AM

Oil prices have rebounded higher overnight after dropping on a surprise crude build reported by API, as stockpiles at a key European storage hub are at their lowest level since September, according to Genscape. Additionally, the structure of the futures curve continues to indicate tighter supply.

“Yesterday’s choppy performance in the oil and equity markets has fueled speculation over how much further the rally in risk assets has to go,” said Stephen Brennock, analyst at PVM Oil Associates.

“Oil prices are treading water ahead of what is sure to be a weather-affected EIA update concerning U.S. oil stockpiles.”

Pent up demand as the global economy recovers has even got some traders talking about the prospect of returning to $100 crude over the next year or two.

API

  • Crude +1.026mm (-5.372mm exp)

  • Cushing +2.738mm (-3.034mm exp)

  • Gasoline +66k (-3.472mm exp)

  • Distillates -4.489mm (-3.905mm exp)

DOE

  • Crude +1.29mm (-5.372mm exp)

  • Cushing +2.807mm (-3.034mm exp)

  • Gasoline +12k (-3.472mm exp)

  • Distillates -4.969mm (-3.905mm exp)

DOE confirmed API's reports of a modest crude and gasoline build (and large distillates draw)...

Source: Bloomberg

Overall crude stocks remain near 13 month lows...

Source: Bloomberg

Gasoline Demand plunged last week - driven we would assume by Texas chaos...

Source: Bloomberg

US crude production collapsed (as expected given the Permian freeze) by 1.1 million barrels a day on average last week compared with the prior period. That was the same as the drop recorded in August when Hurricane Laura hit the Gulf of Mexico and a lot smaller than the headline 4 million barrels figure cited as the loss at the storm’s height. Most of that supply is expected to come back on line during this week.

Source: Bloomberg

The Permian Basin in Texas is now producing about 2.9 million barrels a day after output was restored following the cold snap, according to data analytics firm OilX. The region typically pumps around 3.5 million barrels a day.

WTI pushed up towards $63 this morning ahead of the DOE data after tumbling to a $60 handle after API's crude build, and after DOE confirmed the same story, the oil algos decided to lift WTI above $63

Notably, California is beginning to feel the ripples of oil refinery shutdowns in Texas, with gasoline prices rising faster in the Golden State since a deep freeze crippled fuel-making plants on the Gulf Coast.

Bloomberg Intelligence Energy Analyst Fernando Valle notes that "there’s likely some noise in the inventory numbers this week after an unexpected increase in crude and gasoline supply, despite major outages in Texas production. Refinery throughput fell more than twice as sharply as anticipated. A longer restart time for these plants could push more shale crude to export markets, widening discounts for WTI to Brent."

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