Market Report & Analysis for 5/10/2018 Afternoon Edition
Afternoon Market Overview
The API started the weekly inventory report cycle with a larger than expected draw in crude oil stocks, and larger than expected draws in both gasoline and distillate fuel inventories. Total combined inventories of crude oil and products were strongly lower on the week.
The API reported US crude oil stocks decreased by 1.9 million barrels on the week. Cushing crude oil stocks increased by 1.7 million barrels. They also reported a 6.7 million bbl draw in distillate fuel inventories and a 2.1 million bbl decline in gasoline stocks. Total combined inventories of crude oil and refined products were lower for the week and outside the range of market expectations. The EIA released the May Short-Term Energy Outlook (STEO) Report. OPEC will release its report May 14 with the IEA report due out on May 16. The EIA report reported strong crude oil production growth through 2019. Another bearish data point the EIA reduced 2018 world oil demand growth by 30,000 bpd. Following are the main oil highlights from the report:
• EIA estimates that U.S. crude oil production averaged 10.5 million barrels per day (b/d) in April, up 120,000 b/d from the March level. EIA projects that U.S. crude oil production will average 10.7 million b/d in 2018, up from 9.4 million b/d in 2017, and will average 11.9 million b/d in 2019, 0.4 million b/d higher than forecast in the April STEO. In the current outlook, EIA forecasts U.S. crude oil production will end 2019 at more than 12 million b/d.
• EIA estimates that U.S. crude oil production averaged 10.5 million barrels per day (b/d) in April, up 120,000 b/d from the March level. EIA projects that U.S. crude oil production will average 10.7 million b/d in 2018, up from 9.4 million b/d in 2017, and will average 11.9 million b/d in 2019, 0.4 million b/d higher than forecast in the April STEO. In the current outlook, EIA forecasts U.S. crude oil production will end 2019 at more than 12 million b/d.
• EIA estimates that U.S. crude oil production averaged 10.5 million barrels per day (b/d) in April, up 120,000 b/d from the March level. EIA projects that U.S. crude oil production will average 10.7 million b/d in 2018, up from 9.4 million b/d in 2017, and will average 11.9 million b/d in 2019, 0.4 million b/d higher than forecast in the April STEO. In the current outlook, EIA forecasts U.S. crude oil production will end 2019 at more than 12 million b/d.
• Backwardation (when near-term prices are higher than longer-dated prices) also increased in April and reached the highest levels since 2014, indicating high demand for immediate oil deliveries. The Brent and WTI 1st– 13th spread increased $1.05/b and $1.50/b, respectively, from April 2 to settle at $5.66/b and $6.23/b, respectively, on May 3. The increase in the backwardation of crude oil prices suggests there is an incentive for holders of oil in physical storage to sell on spot markets. STEO estimates that U.S. commercial crude oil inventories in April were 1.5% lower than the five-year average for that month, and total petroleum inventories in countries within the Organization for Economic Cooperation and Development (OECD) are estimated to have ended April slightly below the five-year average.
