Crude Soars Above $47 After Biggest Inventory Draw Since 1999

Following last night's API-reported 12mm barrel drawdown (the most since 1999) - attributed to last week's Gulf shut-ins due to tropical storm Hermine - EIA reported an even bigger 14.5 million barrel draw. Production fell for the 3rd week and Distillates saw a big inventory build but the headline crude build dominated algos which spiked WTI above $47.

API

  • Crude -12.08mm (exp +905k)
  • Cushing -0.7mm (exp -900k)
  • Gasoline -2.388mm (exp -750k)
  • Distillates +944k

DOE

  • Crude -14.5mm (exp +905k)
  • Cushing -434k (exp -900k)
  • Gasoline -4.2mm (exp -750k)
  • Distillates +3.38mm

The breakdown of crude imports, which dipped 21% to 7069k b/d from 8917k last week, and the lowest since November, by region was as follows:

  • PADD1: 581k vs 1239k, -53.1%
  • PADD2: 2468k vs 2566k
  • PADD3: 2478k vs 3237k, -23.5%
  • PADD4: 333k vs 236k
  • PADD5: 1209k vs 1639k

The EIA added that Gulf Coast (PADD3) crude imports fell to 2.48m b/d, the lowest since at least 1990.

Distillates saw a big build.

API's reported 12mm draw (which made sense in the context of major draws during 2008 and 2013 storm seasons in the Gulf) and DOE confirmed it with the biggest draw since Jan 1999...

Unexpectedly large drop in U.S. crude imports, which led to falling inventories and price surge, was due to Tropical Storm Hermine, and thus could be temporary phenomenon that may reverse, according to Commerzbank and other analysts.

 

Following Crude production's sudden dramatic rise 3 weeks ago, US production has fallen back for the 3rd week.

 

Gasoline stocks declined further, dropping by 4.2mmbbls to 228 million in the week ended September 2.

 

East coast gasoline stocks likewise fell notably, declining by 2.3mmbbls to 64.9 million in the past week.

 

Following last night's post-API gains, Iran comments combined with Draghi's letdown were weighing on prices before the EIA data hit, which then exploded above $47.

 

As Bloomberg noted,

“It’s the numbers from last night that are pushing up oil prices,” says Gerrit Zambo, trader at BayernLB in Munich.

 

“Even if we see a bullish number this afternoon I wouldn’t bet on rising prices for too long”

The question is with the temporary storm shutdown over, and rigs back to work, just how big the rebound next week will be.

The Algos may have run out of steam...

Charts: Bloomberg, Reuters