Thursday August 11, 2016
The oil market settled lower on Wednesday, dragged down by a flagging RBOB contract despite a moderately bullish Department of Energy (DOE) inventory summary. Since dipping and settling below $40 early last week, WTI had risen by over three dollars, though that advance was surely limited by the suddenly struggling NYMEX gasoline market. Wednesday’s negative settles were brought on almost entirely by the move lower in RBOB, as early strength in WTI quickly disappeared after the DOE report. In the near term, front month WTI seems to be content to trade in a small range just above $40.
Front month (September) WTI settled a dollar lower on Wednesday (at $41.71), but the market was up early in anticipation of draws in the DOE report. Bulls were looking for bigger draws in gasoline, as refineries have trimmed run rates (less supply) and demand remains strong. The results of this week’s DOE data are as follows:
- Crude Oil – build of 1.1 MMbbls (versus expected draw of 1.0 MMbbls)
- Gasoline – draw of 2.8 MMbbls (versus expected draw of 1.1 MMbbls)
- Distillate – draw of 2.0 MMbbls (versus expected build of 0.5 MMbbls)
- While the product draws were substantial, the crude oil build was mildly disappointing.
For a more detailed view of the DOE report, please read further below.
After taking a few minutes to digest the data, the market moved lower and by early afternoon WTI was trading down the aforementioned dollar. Heating Oil was slightly down on the day while RBOB was setting the (negative) pace, down multiple cents. There was a big build of RBOB in PADD I (East Coast), which surely led to the NYMEX softness. RBOB tumbled even more heading into the close, and settled down over four cents on the day (and at its lowest level in five months). It is pretty evident now that the peak of the NYMEX RBOB market was just before Memorial Day, which is a little unusual (that often happens in the middle of the summer). September WTI settled at $41.71.
Refinery Production Highlights:
- Net inputs of crude oil week-on-week have been whipsawing over 250 thousand barrels a day over the last month. Refinery utilization has been hovering around the historical average.
- The majority of the decline came out of the Midwest which comparatively came a week earlier than the same decline last year.
- Distillate fuels production continued to take a large step backward mother may I, the come off is likely a result of the reduced throughputs effecting the distillate side of production.
- Production of gasoline was essentially flat week on week, and remains over 100 thousand barrels per day above the five year high (which was last year’s level).
- Commercial crude inventories continued the unseasonal trend of building. We are seeing crude oil imports indicative of 2012 levels a time when domestic production was over two million barrels per day less than today.
- Excluding PADDs IV and V crude oil stocks built just shy of three and a half million barrels, a sizable amount of crude oil to be adding to the tanks in the summer drawing season.
- Total distillate fuels stock levels returned from the uptick of last week and drew again, however the draw was sourced almost exclusively from PADD III and it looks as though most of it found its way into PADD I.
- Stocks of gasoline have now drawn six million barrels over the last two weeks, finally breaking up the building glut.