Thursday October 20, 2016
Wednesday's price action continued to follow through from the strength seen over the past week. Markets started the day stronger, following Tuesday night's API report, which showed a 3.8 million bbl draw of crude oil. Although the products were mixed, distillate drew and gasoline built, the overall signal was bullish as the crude oil draw pulled the market higher overnight Tuesday and into Wednesday morning.
The Department of Energy's (DOE) weekly report only pushed the momentum higher, as the crude oil draw (-5.2 million bbls) was even larger than the API reported. However, some of the stats may have been influenced by lack of demand (and imports) caused by Hurricane Matthew's track up the lower Eastern United States.
- Crude Oil Inventory: -5.2 million bbls
- Distillate Inventory: -1.2 million bbls
- Gasoline Inventory: +2.5 million bbls
(For more DOE information, see the bottom section)
The magnitude of the crude oil draw was enough of a surprise to send the market upward price action even further. Yesterday's high in front month WTI was the highest price level the contract has seen since mid-July of 2015.
As mentioned in the past, WTI price action around the psychological $50 level, is important to watch, and we have been oscillating on either side of it for the past several days. However, Wednesday's settle of $51.60, was firmly above and may make $50 level firmer of a floor.
- Net inputs of crude oil for the U.S. as a whole continued to decline, however this was due in large part to nearly a quarter of a million barrel per day reduction from the West Coast.
- The Midwest added a good bit on to their throughput level, but the year-on-year change is dramatic. Last year at this time we witnessed very depressed refining levels.
- Distillate production added on as more crude was processed in the Midwest.
- Gasoline production decline which clearly shows the yield switch from gasoline in the summer to distillates in the winter.
- Commercial crude stocks returned to its gradual decline across the board.
- The crude inventory level in Cushing, OK has fallen below 60-million barrels for the first time this year.
- Stocks of distillate fuels drew for the country as a whole, comprised of draws in the Midwest and East Coast while the Gulf built.
- Gasoline inventories were similar to the distillates as PADDs I and II were in the opposite direction of the Gulf's PADD III, albeit they reversed the changes of the distillates.
PUBLISHED BY PAPCO, INC. (PAPCO)
PAPCO Newsletter Disclaimer. The information that is published in this newsletter, including the market reports, is derived from trade, statistical, and other sources that we believe are reliable and accurate. However, PAPCO does not guarantee the completeness, accuracy, or reliability of such information, and information should not be relied upon as such. Additionally, PAPCO assumes no responsibility for the material contained in the newsletter and the views expressed therein. Further, PAPCO expressly disclaims any express or implied warranties or guarantees with regard to such information. The information contained in this newsletter and any views expressed herein are provided for your informational purposes only and should not be interpreted in any way as an offer, invitation to make an offer, inducement, or recommendation to buy or sell options contracts, commodity futures, products, or any other type of security.