As mentioned above WTI has mostly decoupled itself from the rest of the complex and it will continue to be influenced by the inventory situation in both PADD 2 and Cushing, Ok. At the moment both of these key locations are sitting with record high crude oil inventory levels with more oil on the horizon expected to flow from Canada. Last week there was a modest decline in stocks in this region but one week does not make a trend. In addition we are now entering the early stages of the spring refinery maintenance season which will result in a decline in refinery utilization rates and thus demand for crude oil. If this year is normal we can then expect to see crude oil stocks likely building further or at least not destocking strongly anytime soon. Bottom line WTI is likely to remain isolated from the rest of the complex and relatively bearish versus Brent and other major crude oil pairs.
On the other hand I would expect Brent and the rest of global oil complex to be primarily influenced by the evolving geopolitical situation discussed in detail above. In addition it will also be impacted by the other external drivers mentioned above. Everything other than WTI is likely to continue to carry a risk premium until investor/traders are convinced that the flow of oil will not be interrupted. At the moment one can't make that statement with any degree of certainty.
Late yesterday afternoon the API released their latest inventory assessment. The API released a mixed inventory report. The API reported a surprise decline in crude oil stocks (for the second week in a row), a build in gasoline stocks that was within the expectations and a draw in distillate fuel inventories that also came in within the expectations. The API reported a crude oil inventory draw of about 400,000 barrels even as refinery utilization rates decreased by only 2.7% to 80.8% of capacity. The API also reported a decline in crude oil imports. They also showed a build in gasoline stocks of about 1.2 million barrels while distillate fuel stocks declined by about 1.2 million barrels as the weather last week in the main heating oil consuming part of the US was modestly cold. The results of the API report are summarized in the following table. So far the reaction to the API report has been mildly bullish as prices have increased in overnight trading. In fact if today’s EIA report is in sync with the API report I would view it as neutral to modestly positive as both gasoline and distillate fuel stocks were within the market's projections the crude oil decline is definitely in the right direction in reducing the overhang that still exists in the US…especially in the mid-west region.