Oil Prices Tumble After Record Inventory Builds, Collapse In Demand

Oil prices have been on a vicious rollercoaster overnight, surging (oddly) after API reported US inventories rose by almost 12 million barrels last week (while those in Europe grew by a similar amount, according to data provider Kayrros); then tumbling as Europe opened, only to be panic-bid from around the US equity market open this morning (WTI testing up to $25).

This came after the U.S. slashed its 2020 oil-production forecast by more than 1 million barrels a day on Tuesday, a move that could be enough to satisfy Riyadh and Moscow.

“Many oil producers around the world are now increasingly forced to reduce or close production basically because pipelines and local storage facilities are full,” said Bjarne Schieldrop, chief commodities strategist at SEB AB.

“Natural declines or forced production cuts will thus likely be counted as deliberate cuts” when OPEC and other producers thrash out a deal in talks on Thursday.

So, all eyes once again on the official inventory data this morning as the real impact of global lockdowns begins to show itself.

API

• Crude +11.938mm

• Cushing +6.804mm

• Gasoline +9.445mm

• Distillates -177k

DOE

• Crude +15.177mm – biggest build ever

• Cushing +6.417mm- biggest build ever

• Gasoline +10.497mm – second biggest build ever

• Distillates +476k

Massive surges in stockpiles last week, (and API reporting huge builds in the latest week) were followed in the latest week by even bigger builds…

Source: Bloomberg

Gasoline demand has collapsed…

Source: Bloomberg

Total oil products supplied (implied demand) has imploded…

Source: Bloomberg

To the lowest level on record (at least 30-year lows)…

Source: Bloomberg

Last week saw a major decline in rig counts and crude production plunged by 600,000 barrels a day to 12.4 million barrels. That takes it back to where it was in September and is the biggest weekly drop in at least two decades, outside of those caused by hurricanes.

Source: Bloomberg

WTI had pushed up to $25 ahead of the DOE data and started to fade as we approached the print…and accelerated higher after the massive builds (as production dropped?)…

But that didn’t last…

Finally, Bloomberg Intelligence Senior Energy Analyst Vince Piazza warns that US crude supplies are about four months away from reaching storage capacity, and there’s not much suppliers can do about it. Shut-in production won’t help soon enough, and neither oil tankers nor roughly 72%-full Strategic Petroleum Reserve provide long-term solutions.