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US commercial stocks are the highest ever.

Published Friday, September 11th, 2015

It would not be logical to pin down yesterday’s oil market rally to the weekly statistics on US oil inventories for several reasons. The first and most important one is the headline above. At nearly 1.3 billion bbls oil held in commercial storage has never been this high for more than 25 years when records began. As a matter of fact they were some 200 million bbls lower in December 2008 when WTI approached the $30/bbl mark.

Secondly, the individual headline numbers also show builds with crude oil inventories up 2.6 million bbls, gasoline stocks up 400,000 bbls when the market expected a draw of 600,000 bbls and distillate inventories matching expectation with a build of 950,000 bbls. US demand cannot be responsible for the price strength either as thirst for refined products fell nearly 500,000 bpd on the week. If one really wants to find a bullish reason then he or she will turn his attention to Cushing crude oil stocks. Inventories at the NYMEX delivery point declined by 900,000 bbls. This fall supported the front-month WTI spread which settled 13 cents/bbl higher on the day. However, it has to be pointed out that crude oil stocks at Cushing are still some 36 million bbls above last year’s level and 19 million bbls than the 5-year average.

The real crude oil support probably came from production data. US domestic crude oil output stood at 9.135 mbpd last week. It is the fifth consecutive weekly fall that takes crude oil production 80,000 bbls below last week’s level and nearly 500,000 bpd below the year’s high reached in June. Low oil prices started to have a sustained impact on output. WTI settled $1.77/bbl higher and Brent $1.31/bbl up. Heating Oil gained 361 points whilst RBOB was up 339 points on the day.

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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.