The combination of inventory decline, rising exports, OPEC unable to meet increased production, driving season starting, Russian oil diverted to India and China means continued rise in oil prices.
Update (1200ET): After an initial blip higher rebound, oil prices slipped back lower...
With WTI testing one-week lows at a $100 handle...
This is interesting given the fact that the total US crude stocks (including SPR release) fell by the most since 2019 (and 3rd most ever) and as Bloomberg's Javier Blas points out, "the U.S. is acting as the barrel of last resort to a global energy market hungry for oil."
The U.S. exported a RECORD amount of crude and refined oil products last week, surging above 10 million b/d for the only 2nd time ever.
As Blas ominously notes, there's a huge political risk with U.S. crude and oil refined products exports above 10 million barrels a day (particularly as SPR barrels are flowing overseas, too).
If oil (read: gasoline) prices go higher, the political pressure from both sides of the aisle will rise, a lot.
Oil prices limped higher overnight (as industrial activity in virus-hit China picked up, and API reported an unexpected decline in U.S. crude stockpiles), then gave back all their gains after US equities opened as the NFLX effect rippled through all markets (and the reality of the recent IMF and World Bank growth pessimism sinks in).
"All of this is fuelling concerns about demand on the oil market, which had recently taken somewhat more of a back seat as supply risks dominated the headlines. And yet both OPEC and the IEA had already adjusted their forecasts for oil demand down significantly last week - something that market participants failed to give sufficient attention, if not to say ignored completely," Commerzbank analyst Carsten Fritsch said in a note.
Supply is also expected to rise as the Black Sea oil terminal operated by the Caspian Pipeline Consortium, returns to full capacity after a storm damaged the terminal in February. The terminal ships about 80% of Kazakhstan's crude oil production, Reuters reported.
But for now, all eyes on Crude stocks and gasoline demand for signs of demand destruction and global slowdowns.
API
DOE
After the previous week's huge build, last week saw US crude stocks tumble over 8mm barrels - the biggest draw since Jan 2021. Cushing stocks fell and products saw inventory draws...
Source: Bloomberg
The headline draw in crude stockpiles was boosted by the withdrawal of more than 4.7 million barrels of crude from the Strategic Petroleum Reserve last week. Total nationwide crude inventories (including commercial stockpiles and oil held in the SPR) fell by 12.7 million barrels in the week to April 15. That’s the biggest draw in total crude stockpiles since June 2019 and the third largest in data going back to 1982.
Source: Bloomberg
As Bloomberg reports, the giant draw in crude stocks was driven by a massive jump in crude exports last week.
Shipments climbed to 4.2 million barrels per day (bpd) - ticking above the key 4 million bpd level for the first time since July 2021.
Source: Bloomberg
Gasoline demand rose back to 'average' for this time of year, suggesting no significant demand destruction is evident yet.
US crude production rose by 100k b/d back to 2 year highs...
Source: Bloomberg
WTI hovered back down at around $102 ahead of the official data release and rallied higher after the big draw...
Of course, the big item to watch is what will happen to US gas prices at the pump. This week's rapid retracement offers President Biden another chance at redemption...
Source: Bloomberg
But what happens when the 'Putin Price Hike' is erased and still gas prices are up dramatically since he was elected? Who will get the blame then?