Tuesday ended the three day rally with crude closing down $3.79/bbl to $45.41, RBOB down $0.1035 to $1.3956 and HO down $0.1233 to $1.5779. Yesterday’s drop was surprising considering the approximately $0.30/gallon rally over the last three days. The API data showed a build of 7.8 million barrels in crude inventory, a build of 250,000 barrels in distillates and a draw of 1 million barrels in gasoline.
ConocoPhillips and Husky Energy stated they will start production at two new Canadian oil sands projects, which are expected to produce around 178,000 barrels of crude per day. A hedge fund manager, Pierre Andurand, told the Financial Times, “The market will remain oversupplied in 2016 and 2017. We need low prices for longer to rebalance the market. There are no quick fixes.”
The DOE statistics released today showed a build of 4.6 million barrels in crude inventories, however in Cushing there was a draw of 388,000 in crude. There was a build of only 115,000 barrels in distillates but in PADD 1 there was a 2.8 million barrel build in distillates, and for gasoline there was a draw of 271,000 barrels. The demand for crude oil is up 4% vs the five year average, and the demand for gasoline is up 3% vs the five year average. The increased demand will potentially help with the oversupply in crude and refined products. After a very volatile week, it will be interesting to see what happens next.