WTI Rises As Distillate Stocks Draw, Cushing Back Near ‘Tank Bottoms’, SPR At 43-Year Lows

Oil prices are chopping sideways (to modestly higher) for the second day in a row as traders weighed the ‘dark fleet’ transits with renewed tensions in the Middle East further clouding the outlook for flows through the vital Strait of Hormuz.

“A combination of the escalation between the UAE and Iran, coupled with a market increasingly pricing a ‘closed for longer scenario,’ keeps oil and refined products supported,” said Arne Lohmann Rasmussen, chief analyst at Global Risk Management.

Combine that with the ever-decreasing poll of global inventories (to soak up any supply shortage)…

…and every incremental report on supply and production matters (especially for refined products).

API

• Crude -328k

• Cushing -1.4mm

• Gasoline +1.1mm

• Distillates -2.8mm

DOE

• Crude +4.41mm (-707k exp)

• Cushing -1.314mm – biggest draw since mid-June

• Gasoline +688k

• Distillates -1.53mm

After last week’s massive crude inventory build, expectations were a calmer week (API showed a small draw). The official data showed a sizable build (4.41mm barrels) for the 3rd week in a row while Cushing stocks slipped back. Products were mixed with Distillates drawing down for a 3rd week…

Cushing stocks remain near ‘tank bottoms’…

The SPR saw another drain…

…pushing stocks back to ever lower lows (1983 lows now)…

US crude production rose last week, edging closer to record highs as rig counts continue to rise…

Crude imports eased after a big surge a week earlier mostly thanks to a significant slide in volumes from Canada. Still, shipments from Venezuela remain very strong holding above 700,000 barrels a day and near the highest levels since 2017. 

WTI Crude is rising on the report back up near $85…

Finally, as we have noted numerous times recently, it’s not crude that is the center of the current crisis but refined products with fuel prices, especially diesel, having rallied much harder than oil, as the war between Russia and Ukraine has also contributed to tighter energy markets following attacks on refineries.

That’s heaping cost pressure onto drivers, truckers and farmers, as well as overall industry, and leaks into inflationary impacts for the ‘average joe’ far quicker.

The margin for making diesel from crude oil in the US has topped $100 a barrel, setting all-time highs. In Europe, gasoil futures have more than doubled this year.