The price rally ended yesterday after Saudi oil minister Ali al-Naimi’s speech at CERAWeek, a conference of global energy leaders in Houston. Yesterday, WTI crude closed down $1.51/bbl to $31.87, RBOB closed down $0.0343/gal to $0.9663, and HO finished down $0.0330/gal to $1.0221. Ali al-Naimi announced Saudi Arabia will not be cutting production. He indicated he would prefer if prices would raise, but is willing to ride out the cheap prices at current levels. Naimi had a blunt message to high-cost producers: “Inefficient, uneconomic producers will have to get out, that is tough to say, but that’s fact.” OPEC and non-OPEC members are still planning to meet mid-March to talk about the freeze.
More bearish news came when the API statistics were released last night. The API report showed a large build in crude of 7 million barrels, 300,000 barrels of which is in Cushing, OK. Gasoline had a build of 600,000 barrels, and distillates had a 300,000 barrel draw.
The DOE statistics released today show a crude build of 3.5 million barrels, only half of what the API reported. Gasoline inventories had a 2.2 million barrel draw and distillates had a 1.6 million barrel draw. This is the first gasoline draw since November. Despite a bearish report, some pieces of the DOEs were positive- crude production in the U.S. is dropping, implied demand is stronger than last year and refinery utilization is down. Since the release, prices have reversed; both refined products are up between three and four cents as of 12 PM ET. Once we bounced off technical support levels, the market really took off toward the high side of the current range.