Crude Dumps'n'Pumps Despite Massive Inventory Builds, Biggest Jump In Production In 20 Months

After last week's massive product builds (and crude draw), API suggested additional builds ahead of DOE data which confirmed even bigger than expected builds in Crude, Gasoline, and Distillates. WTI gapped lower on the print then accelerated lower as US crude production rose by the most since May 2015. Then the algos decided it was time to rip oil prices higher (perhaps on indications of stronger demand)...

 

API

  • Crude +1.53mm (+1.5mm exp)
  • Cushing -187k
  • Gasoline +1.69mm
  • Distillates +5.48mm

DOE

  • Crude +4.097mm (+1.5mm exp)
  • Cushing -579k (+100k exp)
  • Gasoline +5.023mm (+2.75mm exp)
  • Distillates +8.356mm

Biggest crude build since November and another week of massive builds in gasoline and distillates...The 13.4 million barrel increase in total U.S. crude and refined products stocks last week is the biggest weekly gain since April 2015.

Notably:

  • U.S. CRUDE WEEKLY CRUDE IMPORTS RISE TO HIGHEST SINCE 2012: EIA U.S.
  • DISTILLATE STOCKS REACH HIGHEST WEEKLY LEVELS SINCE OCTOBER 2010: EIA

Demand improved somewhat last week, after a dismal performance in the last week of 2016. Over the last four weeks, consumption ran at a rate of 19.5 million barrels a day, up 1.3 percent over the same period of a year ago. Still, gasoline demand growth is lacklustre, but diesel consumption is improving.

Crude prices have slipped this week on, among other things, concerns of rising US crude production which exploded higher in the last week...The biggest surge since May 2015

 

The overall reaction was a huge gap lower in crude...

But then the machines took over...

Saudi output curbs create “situation where good news fails to halt profit-taking,” says Ole Hansen, head of commodity strategy at Saxo Bank. “In the short-term I maintain the view that the downside risk is the greatest due to the threat of long liquidation”

As Bloomberg's Javier Blas notes, first take the numbers with a certain degree of scepticism. Year-end factors plus fog in the Houston area are distorting the figures.

  • Said that, the U.S. energy market is yet to show signs of rebalancing, with crude, distillates and gasoline stocks all increasing. Total stocks jumped 13.4 million barrels, the most in nearly a year. That's great news for the bears.
  • The bulls took better demand figures as a reason to buy, however.