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Oil Up Again as US Reports Crude Draw vs Gasoline Build

Commodities Feb 10, 2021 04:20PM ET
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Investing.com - Crude prices rose for an eight day in a row on Wednesday as the U.S. government reported another weekly drop in stockpiles that bucked market expectations — though gasoline inventories ballooned again, exhibiting the one weak link in the oil complex.

New York-traded West Texas Intermediate, the key indicator for U.S. crude, settled up 32 cents, or 0.6%, at $56.68 per barrel, after hitting a January 2020 peak of $58.91. WTI has gained almost 9% over the past eight sessions.  

London-traded Brent, the global benchmark for crude, settled up 38 cents, or 0.6%,  at $61.47, after setting a 13-month high at $61.69.    

Crude stockpiles fell 6.64 million barrels last week, compared with analysts' expectations for a build of 985,000 barrels, the U.S. Energy Information Administration said.

Gasoline inventories rose 4.259 million barrels last week the EIA said, compared with expectations for a 1.81 million-barrel build.

Distillate stockpiles, which include diesel and heating oil, fell 1.73 million barrels in the week against expectations for a draw of 790,000 barrels, the EIA data showed.

"Once again,  the EIA has pulled the rug from under the feet of analysts by announcing a draw like seven times more than the crude build expected by the market," Investing.com analyst Barani Krishnan said in a note. 

"But a closer examination of the numbers will tell you what’s going on and the narrative is quite clear: the current price of oil, especially with how spot contracts are trading in premium or backwardation to immediate nearby months, tells you that it just doesn’t make economic sense to store crude. So what do you do? Make gasoline, that’s what!"

Refinery crude runs processed 152,000 barrels last week, as the refinery utilization rate rose 0.7% to a 11-month high of 83%.

Krishnan added: "Gasoline stockpiles keep piling week after week as the industry makes more and more fuel it doesn’t immediately have buyers for but hopes to find once the warmer months come around, people start driving more and virus fears abate. That U.S. refinery utilization rate was at its highest since March is no accident.” 

He said on paper, the crude draws look staggering with 17.5 million barrels written off since the last build of 4.35 million for the week to Jan. 15. 

But for perspective, one had to look at the gasoline builds, which are at nearly 20 million since the last meaningful drawdown of just over 1 million barrels in the Christmas week. 

“The gasoline drawdown also masks two other elements in the EIA data that should get more attention. First is the 800,000 barrels per day drop in U.S. crude exports, which have, until last week, been resilient with the sort of demand coming from China.”

“Second is the tick-up in production to 11 million bpd after holding at 10.9 million for a while. This, however, is contingent on the EIA changing its math again next week as the U.S. industry isn’t really drilling away like before.”

On the distillates front, Krishnan said the 1.7 million barrels last week was positive, corresponding with the surge in heating oil demand from the cold weather blanketing most the U.S. Northeast after recent snow storms.

 

Oil Up Again as US Reports Crude Draw vs Gasoline Build
 

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Comments (2)
Jeffrey Vose
Jeffrey Vose Feb 10, 2021 10:42AM ET
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Who estimates this stuff? Are they just throwing darts at random numbers?
Ernest Wong CA
Ernest Wong CA Feb 10, 2021 10:42AM ET
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always a draw regardless of lockdowns and airlines landed. we can see the build of fuel and distillates and yet the market chose to see blind
Sam Gates
Sam Gates Feb 10, 2021 10:41AM ET
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Less supplies higher prices. The saudi will start pumping soon to push the price back down
Ferenc Abele
Ferenc Abele Feb 10, 2021 10:41AM ET
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It is tricky as the high price is good even for them
Ernest Wong CA
Ernest Wong CA Feb 10, 2021 10:41AM ET
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Ferenc Abele  it's not a free lunch. the unit price is high but Saudis suffer from very low revenue and thus fiscal deficit. Don't know how long they can "tolerate" that though
Barani Krishnan
Barani Krishnan Feb 10, 2021 10:41AM ET
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Ernest Wong CA  Excellent thinking, Ernest. Wish I've more readers like you. The Russians rightly called the Saudi cuts "generous". Know why? Because nobody is giving up market share like the kingdom now. Every is producing at late 2020 levels while the Saudis are the only ones really cutting and cutting deep. By the time, they decide to shore up production, the others will be producing even more and slowly and surely, a battle for market share will start, resulting in higher overall production. OPEC is such sham; there is no real OPEC anymore -- it's just the Saudis and the Emiratis. Everyone else at the table couldn't care if the cartel collapses. Russia, in the name of global ally, is the luckiest beneficiary.
 
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