WTI Extends Gains After Official Inventory Data Shows Big Draws

Oil prices have chopped around overnight, rallying hard as Europe opened after weakness following last night’s surprise crude build reported by API.

“The API was positive I’d say, with draws in gasoline and distillates” and crude little changed, said Bjarne Schieldrop, chief commodities analyst at SEB AB. “A large drawdown in the fourth quarter or not is the big question.”

Additionally, as Bloomberg reports, in the near term, the demand outlook looks troubled. In Europe, the profit from turning crude into diesel slipped toward $2 a barrel earlier, a record low in data going back to 2011. That curbs demand for crude from refineries. The head of Russia’s Gazprom Neft PJSC said that the recovery in global oil consumption has indeed slowed down.

API

• Crude +691k (-4.0mm exp)

• Cushing +298k

• Gasoline -7.735mm (-1.9mm exp) – biggest draw since Sept 2017

• Distillates -2.104mm (+1.2mm exp)

DOE

• Crude -1.64mm (-4.0mm exp)

• Cushing +4k

• Gasoline -4.03mm (-1.9mm exp)

• Distillates -3.364mm (+1.2mm exp) – biggest draw since March 2020

Dramatic draws in crude, gasoline, and distillates… This is the 7th weekly draw in gasoline in a row and biggest distillates draw since March

Source: Bloomberg

Between Hurricanes and Tropical Depressions, there is still some lingering noise in the production data, which showed a small drop in the last week…

Source: Bloomberg

WTI hovered around $40 ahead of the official inventory data and extended gains on the draws…

Bloomberg Intelligence Senior Energy Analyst Vince Piazza notes that resurgent coronavirus infections in Europe could depress crude demand sooner than we had expected. With the U.S. past peak summer travel season, we’re braced for near-term oversupply. Interestingly, domestic production has reawakened with a WTI rally through $43, pressuring sentiment and balances.