WTI Crude Nears $50 Then Tumbles After Bigger Than Expected Gasoline Build Offsets Production Cut

The July WTI contract neared $50 for the first time since early November ahead of this morning's DOE data, extending gains from last night's API-reported biggest draw since 2015 (which we warned seemed like catch up from a big build last week). DOE confirmed the big draw with a 4.22mm drop in inventories (less than API's 5.13 but more than 2mm expected) and further an even bigger draw at Cushing. Gasoline saw an unexpected build as Distillate inventories fell for the 6th week in a row. Production fell for the 18th week in a row, holding at Sept 2014 lows. Crude's reaction was chaotic, testing up over $49.60 and down to a $48 handle.

API

  • Crude -5.137mm (-2mm exp)
  • Cushing -189k (-400k exp)
  • Gasoline +3.06mm (-1.5mm)
  • Distillates -2.92mm (-750k exp)

DOE

  • Crude -4.22mm (-2mm exp)
  • Cushing  -649k (-400k exp)
  • Gasoline  +2.04mm (-1.5mm)
  • Distillates -1.28mm (-1m exp)

The biggest headline is not the significant draw in crude but the very unexpected build in gasoline inventories...

 

Production - down for the last 18 weeks - is hovering at its lowest since Sept 2014 (though some context is in order - at around 8.8m bbl/day, it is still up 60-70% from pre-2011 levels)

 

The reaction...total chaos... as we suspect the gaosline draw is bringing doubts over demand...

 

After nearing $50...

 

Since the last time WTI traded at $50, the rest of the curve has collapsed amid aggressive hedging...

 

Bear in mind, seasonally, the trend is for a draw in May. In fact May of 2015 saw one of the biggest draws of all time at -16.4 million. How did 2015 end?

Note - the 2015 chart above is lagged by 13 months.

Charts: Bloomberg