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WTI continues to soar this morning, near $72, after API reported a huge crude draw, and DOE confirmed it with a 9.891mm draw - the biggest since Sept 2016. WTI spiked above $72, helped by the second week in a row of no production increase.

Bloomberg Intelligence Senior Energy Analyst Vince Piazza explains that unplanned downtime at a Canadian syncrude upgrading facility may be contributing to an uplift in domestic crude demand. Refining utilization is expected to remain elevated after hitting 96.7% in the previous reporting period, while crude oil exports are well-entrenched above 2 million barrels a day.

API

  • Crude -9.22mm (-3mm exp) - biggest draw since Sept 2016

  • Cushing -1.741mm (-1.3mm exp)

  • Gasoline +1.152mm

  • Distillates +1.75mm

DOE

  • Crude -9.891mm (-3mm exp) - biggest draw since Sept 2016

  • Cushing -2.713mm (-1.3mm exp)

  • Gasoline +1.156mm

  • Distillates +15k

DOE confirmed the massive crude draw this week - even bigger than API's - the biggest since Sept 2016

Crude exports soared to a record 3mm barrels last week...

 

Crude oil production is just 100,000 barrels a day shy of the 11 million bpd mark, as drillers have been running at full speed ahead. With U.S. prices back above $70 a barrel, we expected continued growth in production, but instead it flatlined at 10.90mm bpd as perhaps the Permian bottleneck is starting to impact production explicitly.

The Permian pipeline bottleneck seems to be back as the discount in the markets has surged once again in recent days...

So production flat and exports at record high - helps explain the massive crude draw.

WTI/Brent differentials have narrowed to around $6 a barrel on disclosure of potentially looser balances, with future output from OPEC balanced by land-locked Cushing stockpiles 47% below last year.

Supply outages in the oil market are growing and that's adding up to a more supportive outlook for crude prices.

Kazakhstan today joined a list of oil producers with disruptions (or at least pending disruptions) that includes Canada, Iran, Venezuela, Angola and Libya. Of those, it wouldn't be surprising to see Canada and Kazakhstan lift production again within a month or so. But Venezuelan output shows no signs of ending its freefall, the Angolan oil sector lacks investment and Libyan oil ports have just been handed to a regime not recognized by the international community.

“Saudi Arabia faces the daunting, if not impossible, task of managing the oil market; prices are going to stay elevated,” said Victor Shum, a vice president at consultants IHS Energy. “The uncertainty over Iranian crude supply is going to cast a shadow over the oil market. The cut in supply may be even bigger than thought, depending on how successful the U.S. is in getting countries not to buy Iranian oil.”

And that is what has helped drive WTI up to $72 before the DOE data hit and explode above ti as the massiv draw printed...

“Even if Saudi Arabia is ramping up, there’s enough concern in the market about production shutdowns, whether it’s Canada, Libya, to hold these prices up,” said Rob Haworth, who helps oversee $151 billion at U.S. Bank Wealth Management in Seattle. “It’s a market that still has a bullish bias to it.”