Cushing stocks reach record high as capacity continues to quickly fill
Tuesday's API report was mixed but overall bearish after a huge build in crude oil inventories and even with small draws in refined product markets. Crude oil inventories increased strongly versus a market expectations for a much smaller build while gasoline and distillate fuel declined versus a market expectations for a modest build.
Crude oil imports surged ahead in spite of the Houston Ship Channel being close for 3 days last week. Imports increased by 679,000 bpd. Total inventories of crude oil and refined products combined were strongly higher on the week.
The oil complex is lower since the inventory release on late Tuesday afternoon and heading into today’s EIA oil inventory report to be released at 10:30 AM EST today. The API report was a surprise signal hitting a bearish oil complex as participants await today’s EIA inventory snapshot.
The API reported Cushing crude oil stocks increased by 3 million barrels for the week. The API and EIA have been very much in sync on Cushing crude oil stocks and as such we should see a similar draw in Cushing in the EIA report. Directionally it is bullish for the Brent/WTI spread. The build in Cushing stocks is most likely due to the positive economics for storage trades. With ample surplus storage capacity in Cushing traders are continuing to initiate storage trades in that location.
My projections for this week’s inventory report are summarized in the following table. I am expecting a mixed picture in inventories this week with another strong build in crude oil and draws in both distillate fuel and gasoline with a modest decrease in refinery utilization rates.
My projections for this week’s inventory report are summarized in the following table. I am expecting builds in inventories across the board this week with a modest build in crude oil and builds in both distillate fuel and gasoline with a modest decrease in refinery utilization rates. Inventories were likely impacted by the closure of the Houston Ship Channel (HSC) last week for three days or so.