WTI Sinks After Big Gasoline Build Sparks Demand Doubts

Oil prices are higher overnight, as Pfizer vaccine headlines offer hope for a return to normal demand (shrugging off last night’s bearish API inventory report) and signs of robust consumption in Asia.

“It’s going to help support petroleum demand when the vaccine becomes more readily available, but widespread distribution isn’t really expected until next year,” said Andrew Lebow, senior partner at Commodity Research Group. “But nevertheless, the news definitely adds to sentiment and helps support the market.”

 

 

API

• Crude +4.174mm (+100k exp)

• Cushing +176k

• Gasoline +256k (+300k exp)

• Distillates -5.024mm (-1.8mm exp)

DOE

• Crude +769k (+100k exp, +1.36mm whisper)

• Cushing +1.2mm

• Gasoline +2.611mm (+300k exp) – biggest build since May 2020

• Distillates -5.216mm (-1.8mm exp)

After last night’s surprising (and large) crude build reported by API, whisper numbers rose into the official print which came at +769k (considerably less than API). However, Gasoline stocks jumped more than expected. This is the 9th week in a row of Distillates draws.

Source: Bloomberg

The surprisingly large build in gasoline stocks may be here to stay in the short-run as US states discourage Thanksgiving travel, the biggest driving holiday of the year.

US crude production continues to be noisy as storm shut-ins come and go, but we are back to ‘normal’-ish…

Source: Bloomberg

As Bloomberg’s Anastacia Dialynas notes, a big underlying question is what is the larger trend for production? EIA anticipates November production will grow and average 11.25 million barrels per day, according to the outlook it published last week. However, low activity in the shale patch will soon translate into output declines, which would pull overall production numbers down.

WTI traded just above $42 ahead of the official inventory data and slipped below after the bigger than expected gasoline build…

“Risk assets and oil will reset higher, not because current and short-term conditions will change, but because the expectations around the path to economic and oil demand recovery will change,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA.