Weekly Oil Data: What is the Impact of the Fifth Largest Crude Draw since 2010

Inventories, Exports, Imports, and Refinery Utilization (Two Tables and 13 Charts)

MAIN TAKEAWAY

1. The EIA today reported a massive crude withdrawal from commercial inventories, which is the fifth-largest draw since 2010.  In terms of magnitude, and as a percentage of total commercial inventories, this is the sixth-largest draw since 2010.

2. In terms of price impact, the increase is limited and temporary. Not only because of general sentiment but also because of evidence from previous years. Looking at the largest 10 withdrawals since the beginning of 2010, in all but one of the cases prices increased the day the EIA reported its weekly data. Prices also declined in all cases but one in the days that followed the data release.

3. At 455.2 mb, commercial inventories are standing at comfortable levels.  They need to decline by more than 40 mb to create a very bullish sentiment.  In the absence of other triggers, the price rise today is temporary.

4. There has been another release of 1.6 mb from the US Strategic Petroleum Reserve (SPR) as part of the 26 mb congressionally mandated sales for this year. An additional 12.4 mb will be released between now and the end of June. As we said in previous reports, all the remaining releases have already been priced in. 

5. Gasoline and distillates inventories have continued to decline, and they are currently at critically low levels. Gasoline inventories are at their lowest since 2014 for this time of the year, while distillates inventories are at the lowest levels since 2008.

6. Although the adjustment number declined last week, the EIA is still struggling with the large adjustment numbers.

7. The US SPR draws will stop by the end of June.  Voluntary oil output cuts by large OPEC+ producers, meanwhile, went into effect this month and they are expected to continue until the end of 2023. It remains to be seen what OPEC+ will decide during its June 4 meeting. Some traders believe the status quo is bearish, despite the output reductions announced in early October 2022, and the voluntary cuts that were applied this month.

IN DETAIL