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US is very well supplied with oil as weather gets milder

Published Thursday, March 12th, 2015

What do you get when US, USGC and Cushing crude oil inventories and domestic production are at all-time highs? Weakening WTI, you would have thought. It was indeed the case yesterday at least as far as WTI spreads are concerned. The front-month spread weakened to $-1.85/bbl, down 7 cents/bbl on the day and the WTI/Brent arbitrage closed at -$9.37/bbl, $1.27/bbl below Tuesday’s settlement. The big nationwide build to 448 million bbls and Cushing build to 51.54 million bbls came despite crude oil imports falling to 6.3 mbpd alongside a small domestic production increase of 42,000 bpd week-on-week to 9.37 mbpd.

The big jump was not coupled with falling refinery runs as utilization increased 1.2% nationwide. In PADD1, however, runs were up 19.5% as refiners ramped up production after weather-related outages on the east coast. Milder temperatures affected distillate demand that fell 300,000 bpd on the week and as a result inventories rose 2.53 million bbl. Gasoline stocks were marginally down.

In the face of bearish weekly stats the NYMEX contracts did well as WTI only lost 12 cents/bbl and products finished the day slightly higher. This surprisingly good performance was due to Brent that rallied and finished the day $1.01/bbl higher. This strength comes from a combination of the kidnapping of foreign oil workers in Libya, the Iraqi army’s offensive against IS in Tikrit and possibly Brent option expiry. The front-month Brent spread closed at -34 cent/bbl, the strongest since December.

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Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.