WTI Tumbles After Bigger Than Expected Crude Build

Oil prices rebounded today after yesterday's clubbing, thanks to a weaker dollar and concerns about supply disruptions thanks to Tropical Storm Zeta (which has left U.S. Gulf crude producers shutting almost half their total oil output).

“The path and the strength might result in larger-than-earlier expected production shut-ins,” said Giovanni Staunovo, a commodities analyst at UBS Group AG.

“The storm will also impact import and exports of crude and oil products.”

Tonight's inventory data is unlikely to reflect this too much (only in terms of preparation for the storm)...

API

  • Crude +4.557mm (+1.2mm) - biggest build since May

  • Cushing +136k

  • Gasoline +2.252mm

  • Distillates -5.333mm

Somewhat confirming demand concerns, API reported a bigger than expected crude build and big gasoline build...

Source: Bloomberg

WTI was unable to get back to $40 ahead of the API data, hovering around $39.50 before the print, tumbling to $39 the figure on the big crude build...

In addition to the demand concerns (no US stimulus and EU lockdowns), supply is building in Libya...

“Now that we’re seeing lockdowns starting to happen in Europe, the demand for jet fuel is just going to continue to fall going into the winter season,” said Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors LLC. “With Libya output coming back, that’s adding more oil to the market that’s not needed.”

Finally, ahead of tomorrow's official data, we note that storage levels are rising, which may not be appreciated by the market, with Cushing about 80% full, while inventories in the U.S. near 73% of capacity.