Last night's first glimpse of Harvey's impact on energy confirmed a sizable crude build but only modest gasoline draw. WTI/RBOB prices slid into the DOE print and extended losses (after a quick kneejerk higher) following a bigger than expected crude build (+4.58mm vs +4mm exp). Gasoline and Distilates saw bigger draws than API reported but it was the collapse in Lower 48 crude production that stood out with most of Texas offline.
- Crude +2.79mm (+4mm exp) – biggest build in 5 months
- Cushing +669k (+1mm exp)
- Gasoline -2.544mm (-5.2mm exp) – biggest draw in 6 weeks
- Distillates -610k
- Crude +4.58mm (+4mm exp) – biggest build in 5 months
- Cushing +797k (+1mm exp)- biggest build in 5 months
- Gasoline -3.20mm (-5.2mm exp)- biggest draw in 2 months
- Distillates -1.396mm
The inventory changes reported by the API were much smaller than those forecast by analysts. As a reminder, Saxo Bank's Ole Hanson notes that "inventory data later is a lot of moving parts which could be quite skewed away from what we’ve seen in recent weeks." Additionally, investors “are going to be skeptical of the data,” James Williams, an economist at energy researcher WTRG Economics, told Bloomberg. “It might be pretty flaky data this week and next, so I don’t expect to see a big market-mover”
Bloomberg's Fernando Valle notes energy's past week was all about Hurricane Harvey as refineries shuttered, choking output and hauling down inventories of gasoline and distillates.
Bigger than expected crude build and bigger gasoline and distillate draws than API reported…
Bloomberg's Fernando Valle points out that the increase in crude inventories was largely expected after the devastating impacts of Hurricane Harvey on the Gulf Coast. The draw on refined product inventories was weaker than expected, as lost demand — both locally and abroad — offset lower-than-expected refinery utilization. Investors' focus will now shift to the restart of refineries and export ports.
As one might expect, Gulf Coast imports fell to a record low.
Bloomberg's David Marino notes that exports tumbled with Texas ports closed.
Crude was the lowest since 2014, before the export limits were lifted. Gasoline fell by more than half to 319,000 barrels a day, the least in four years, and distillate shipments were the lowest since 2011. Look for those numbers to rebound as ports and pipelines reopen fully.
Production declined in the previous week, and with most of Texas ofline last week – Crude production in the Lower 48 collapsed…
This is the biggest week-on-week fall since August 2012, when Hurricane Isaac shut in more than 1.3 million barrels a day of Gulf of Mexico production.
WTI and RBOB have drifted lower after last night's API data, heading into the DOE data. The kneejerk reaction to the crude build, gas draw and production crash was higher prices…
But that did not last long…
Brent “reached the May high and so far it’s been firmly rejected,” says Ole Hansen, head of commodity strategy at Saxo Bank. “It’s quite significant if we are getting a decent rejection here as it could indicate a short-term top in the market”
“It’s a market that is starting to struggle to move much higher, Brent crude up to $55 is probably as good as it gets at this stage”: Hansen