DOE Confirms Major Crude Draw, Oil Algos Confused As Production Hits Record High

Oil prices have extended yesterday's gains, following last night's surprisingly huge crude draw (reported by API) and OPEC+ saying they expect a “significant” decrease in global crude stockpiles in the second half of this year after they trimmed output more than planned.

“Oil markets are broadly balanced at the moment, benefiting from the typical seasonal acceleration in demand,” said Martijn Rats, global oil strategist at Morgan Stanley.

API

  • Crude -11.1mm (-2.25mm exp) - biggest draw since June

  • Cushing -2.4mm

  • Gasoline -349k

  • Distillates -2.5mm

DOE

  • Crude -10.03mm (-2.25mm exp; Whisper -5.47mm)

  • Cushing -1.98mm

  • Gasoline -2.09mm

  • Distillates -2.063mm

Following the massive crude draw reported by API, official government data reported a large draw of 10.03mm barrels (slightly below API but well above expectations) along with draws across the rest of the energy complex...

Source: Bloomberg

Crude stockpiles fell to their lowest levels since Oct 2018 but Gasoline and Distillates are relatively flat...

Source: Bloomberg

US crude production has been flat since late May (though near record highs) but spiked higher in the last week to new record highs even as rig counts have plunged...

Source: Bloomberg

WTI traded around $56.50 ahead of DOE data (up almost $2 from pre-API data last night), breaking through the 200-day moving average and flirting with the 50-day.

However, it appears the combination of yesterday's post-API spike and this morning's surge has all but priced in the surprisingly large draw...

However, as Bloomberg notes, crude is still heading for its second monthly drop this year amid spreading pessimism over international trade and economic growth. However, prices are drawing some support from political tensions in the Middle East, with Iran’s leadership rebuffing suggestions of a meeting with President Donald Trump until the U.S. lifts sanctions on the country.