WTI Slips After US Crude Production Rise, Big Product Inventory Builds

After yesterday’s plunge, crude prices rebounded overnight after a modest API draw, helped by a Goldman report putting the plunge in context as being dramatically overdone. OPEC+ uncertainty is weighing on prices this morning however ahead of today’s official inventory/production data.

OPEC+ has “erred on the side of caution since it began slowly boosting supplies,” said Stephen Brennock, an analyst at PVM Oil Associates.

A potential decision to shelve January’s planned increase and keep quotas flat “comports with its cautious approach.”

While OPEC+ and the omicron variant dominating the market, there is also another wildcard in the background – the Iranian nuclear deal. Diplomats are working on a draft agreement, state-run Press TV reported, but there was little sign of an imminent deal after talks resumed on Monday. 

DOE

Crude -909k (-1.45mm exp, -700k API)

Cushing +1.159mm

Gasoline +4.059mm – biggest build since June

Distillates +2.16mm – biggest build since July

A smaller than expected crude draw and major product builds are not what the bullsih doctor ordered…

Source: Bloomberg

Cushing stocks continue to hover near multi-year lows (anything below 30m bbls is considered significantly low) but rose for the 3rd straight week (the longest streak since August)…

Source: Bloomberg

Many eyes were on gasoline inventories and demand to gauge the state of consumption over last week’s Thanksgiving holiday. It’s typically a major travel season, particularly driving. For many Americans, it would be the first time for air travel before the pandemic triggered widespread restrictions. Gasoline demand for Thanksgiving week dropped significantly, it weakest level since 2012 (ex- COVID)

Source: Bloomberg

US crude production rose to its highest since May 2020, amid the ongoing rise in rig counts…

Source: Bloomberg

WTI was hovering between $68 and $69 ahead of the official print and slipped lower after the data…

Although oil remains in backwardation – a bullish structure with near-term contracts trading above later-dated ones – differentials have narrowed.

The question is, will gas prices at the pump follow wholesale and crude prices, or will the latter rebound before the supply chain can catch down…