Yesterday EIA data showed a crude stock build of 6.6 million bbls last week. The crude build—along with speculation that next week’s production freeze meeting will likely only result in, if anything, an informal promise among countries with no binding documents—put pressure on the market yesterday. Further, energy experts suspect an output freeze will not do anything to diffuse the supply/demand imbalance and will have little impact fundamentally. Producers are not expected to cut output consistent with the expected fall in demand, and with domestic production aggravating the burden, global crude markets could be driven down even further. Iran’s reluctance to freeze output remains one of the most challenging obstacles. Now at 536.5 million bbls, weekly crude inventories have reached another all-time record.
Today,the market is trading fairly flat on both RBOB and HO as the market is attempting to construe how meaningful Sunday’s meeting in Doha between 12 oil-producing countries will be. The Investment House predicts that there is a 75% chance of an informal agreement, a 15% chance of Iran joining the freeze, and a 15% chance of a complete failure in discussions. Yesterday, May WTI settled down 41cts/bbl to $41.76/bbl. HO fell $0.0103 to $1.2656, and RBOB settled down slightly, $0.0048 to $1.5295.
In spite of yesterday’s crude build, Cushing saw a draw of 1.767 million barrels due to the Keystone Pipeline outage. EIA data also showed a 4.2 million bbl draw in gasoline and a draw in distillates, likely due to a fall in refinery utilization and RVP transition. During the past few weeks refineries were running harder as a result of advantageous crack spreads, and now a few units are offline due to outages and refinery maintenance. U.S. production fell below 9 million bpd for the first time since October 2014.