WTI Dips After Across The Board Inventory Builds, Big SPR Drain, & Record US Production

Oil prices are higher again this morning after President Donald Trump nixed the idea of an eventual deal with Iran.

“We don’t need a deal with Iran,” Trump wrote in a social media post.

 ”Those days have long since passed.”

The U.S. and Iran had reportedly been in on-again, off-again negotiations over the issue reopening the strait. So far, none of those talks yielded a comprehensive deal. Trump claimed a deal was not necessary because the U.S. already controls the strait.

“We’ve got their money, Hundreds of Billions of Dollars, and we’ve got their Strait!” Trump wrote in his social media post.

Trump had previously floated the idea of resuming hostilities after the midterm elections, but for now, no such actions.

Flareups have also persisted. The Islamic Republic said two supertankers loaded with oil were halted by explosions while using the “unauthorized” route through the Strait of Hormuz on Wednesday night, according to the semi-official Iranian Students’ News Agency.

With the geopolitical premium on the rise again, the inventory and supply data may become more important again…

API

• Crude +9.0MM
• Cushing +182k
• Gasoline +4k
• Distillates +1.5MM

DOE

• Crude +4.65MM
• Cushing +106k
• Gasoline +1.799MM
• Distillates +4.071MM

After API reported a huge 9mm barrel crude build last week and while the official data was smaller, it was still a sizable build (4.65mm barrels) – the most since August. There were builds across all cohorts, most notably in Distillates (the biggest build since July)…

After a few weeks of relative calm, the Trump admin drained a large 2.65mm barrels from the SPR last week…

Total Distillates stocks remain at record lows for this time of year…

US Crude production rose to a new record high…

WTI was trading up around 1% just below $87.50 ahead of the official data, and dipped after the build…

Additionally, gas prices at the pump continued to slide further below $4 (still record highs for this time of year)…

Although the global benchmark has rallied more than 50% this year, it has fallen sharply this month on a recovery in flows from the Middle East and speculation that the Democrats’ victory in US midterm elections could hasten the end of the conflict.

“If talks are off, it could mean status quo remains and Brent drifts lower as more oil comes out the gulf,” said Arne Lohmann Rasmussen, chief analyst at Global Risk Management.

 “Alternatively, it means the risk of Iran escalating has gone up. I think the market will buy into the second option.”

The Middle East isn’t the only flashpoint for oil supplies right now. 

In Europe, Russian refineries have been hit again by Ukrainian drone strikes. That has compounded a squeeze on diesel supplies that’s been caused by the Iran war, because Russia has been forced to stop exporting the fuel. In one of the latest attacks, Ukraine said it attacked Russia’s largest oil refinery deep in western Siberia for a third time. It provided no details of damage to the Omsk refinery.