WTI Algos Confused At Inventory Data As Summer-Driving-Season Demand Disappoints

WTI has traded sideways (below $69) since last night’s smaller than expected crude draw from API, but algos could not figure out what to do as crude inventories dropped notably but products and Cushing saw stocks rise.

Investors “will look at export numbers to get a handle on global demand to see if it is softening,” Phil Flynn, senior market analyst at Price Futures Group, says. At the same time, focus will be on refiner demand for crude with fall maintenance season beginning, he says.

NOTE – Tropical Storm Gordon won’t have any impact on this week’s report. It should show up in next week’s report.

API

  • Crude -1.17mm (-2.9mm exp)

  • Cushing +613k (+600k exp)

  • Gasoline +1.0mm

  • Distillates +1.8mm

DOE

  • Crude -4.302mm (-2.9mm exp)

  • Cushing +549k (+600k exp)

  • Gasoline +1.845mm (-1.5mm exp)

  • Distillates +3.199m (+700k exp)

Crude inventories drewdown by a4.3mm – considerably more than API and expectations – but Cushing stocks rose for the 4th week in a row and Gasoline and Distillates also both saw inventory builds.

Production was unchanged last week (remember that unless production rises by 100k, the incremental change in the new data is ignored).

Interesting, as the 2018 summer driving season draws to a close, Bloomberg notes that it hasn’t been a memorable one as far as gasoline demand is concerned. Consumption — measured on a four-week moving average basis — has lagged last year’s level, as stubbornly high pump prices crimped driving. Low deliveries in early August may support demand for a couple of weeks, but the trend is likely to be downward over September and October.

WTI drifted lower into the DOE data (touching $68.50) but kneejerked higher on the DOE print that showed a bigger than expected crude draw, then faded back to unchanged as the rest of the data showed builds…

 

Meanwhile, the WTI-Brent spread soared to $9…

“The Brent forward curve has returned to backwardation as of Sept. 3, reflecting a tightening market that is already feeling the effects of U.S. sanctions on Iran,” Jefferies analyst Jason Gammel wrote in emailed report.

It seems most of the world is ‘bending the knee’ to US sanctions and winding down its Iran crude imports…

And the Permian pipeline discounts tumbled to near record highs…

 

 

 

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