On the day that Lou Reed would have celebrated his 74th birthday, the oil market is taking a walk on the wild side ahead of EIA inventories. Here are ten things to consider on this first Wednesday in March:
1) The positive momentum seen in the oil market in recent days has been curbed by last night’s API report, which showed the biggest build to crude stocks in 11 months. Not only were total inventories a growlingly bearish number (of +9.9 million barrels), but Cushing inventories were said to have increased by a mammoth 1.8 million barrels. If a similar number is seen from the EIA report, it will propel stocks at the pipeline crossroads of the world to over 90% full.
2) If you wanted to find a bullish lining to this bearish report, gasoline inventories drew by 2.2 mn bpd – as the impending peak of refinery maintenance season in the coming weeks means falling gasoline production, while gasoline demand continues to look robust. We should see a similar stance from the EIA report today: decent builds for oil and distillates, a decent draw to gasoline stocks.
3) The crude build this week makes sense from a ClipperData perspective, as we saw PADD 3 imports tick higher last week. While we only saw 1 VLCC arrive from the Arab Gulf after a deluge seen earlier in February, there still remains a backlog of floating storage offshore in the US Gulf. As of yesterday, there is over 10 million barrels of Arab Gulf crude waiting to discharge – which accounts for about a third of the total volume waiting.
4) While US oil inventories push north of 500 million barrels, oil inventories on a global basis are pushing to a new record high. As the chart below illustrates, global inventories are already at a record 3 billion barrels. The IEA still sees a net stock build this year and next, while the EIA is of a similar view. It expects global oil inventories to rise by