WTI/RBOB Slide As Crude Production Hits 20-Month High, Cushing Glut Hits Record High

WTI/RBOB prices slipped ahead of DOE data as Canada's growth outlook cut trumped Saudi Arabia's wishy-washy chatter on production cuts. DOE data confirmed the biggest crude draw of 2017 (-2.16mm) and gasopline and distilates saw the 8th week in a row of drawdowns but Cushing's 276k build pushed it to a new record high as US crude production rose once again to its highest sine August 2015.

 

API

  • Crude -1.3mm (-1.5mm exp) - biggest draw since 2016
  • Cushing +358k (+800k exp)
  • Gasoline -3.7mm (-1mm exp)
  • Distillates -1.6mm (-1mm exp)

DOE

  • Crude -2.16mm (-1.5mm exp)
  • Cushing +276k (+800k exp)
  • Gasoline -2.97mm (-1mm exp)
  • Distillates -2.15mm (-1mm exp)

The biggest crude draw since 2016 and 8th weekly draw in gasoline and distillates inventories...

As Bloomberg's Javier Blas notes, the most negative for the bulls is Cushing, the crucial storage town in Oklahoma that serves as the delivery point of the Nymex WTI oil futures contract. Crude stocks there rose to a fresh all-time high, now at 69.4 million barrels (+276,000 barrels from the previous week). According to the EIA, Cushing has a maximum working capacity of 77 million barrels, so we are really approaching tank-tops.

 

Blas also notes, the other big negative for the bulls is U.S. production. The EIA is forecasting another big week-on-week jump (+36,000 barrels a day), bringing total output to 9.235 million barrels a day, the highest since January 2015. On weekly readings (which are subject to big revisions), domestic production has increased roughly 800,000 barrels a day from a low point in July. The growth isn't just coming from shale, but also from rising output in the U.S. Gulf of Mexico.

US Crude production rose for yet another week to its highest since August 2015...

 

And the reaction to the DOE data (after some volatility going in following BoC's growth outlook reduction and loonie weakness) was an initial kneejerk higher then slip lower...

 

What happens next?

 

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