Oil Prices Struggle After Weekly API Report Shows a Supply Build

October 21, 2020 08:22 AM
API reported a 584,000 barrel crude oil supply build
Surprise supply drop was in distillates, not oil
Russia can't commit yet to OPEC+ cuts
Energy Report

[node:field_image:alt]

 

The Phil Flynn Energy Report 

Stuck in a rut     

Oil is stuck in a rut and has the same odds to break out as we have with the House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin making a Covid-19 relief agreement today.

After posting its first gain in 4 sessions, oil is starting to struggle. We still have no deal on a stimulus package, but the main reason that oil is struggling is because the API defied the whispers and dared report a 584,000 barrel crude oil supply build. The market seemed shocked and reversed a late-session rally because there were talks of a significant supply drop going into the report. Yet supply reports in the aftermath of a hurricane like Hurricane Delta can be messy and unpredictable. 

Yet the surprise drop in supply wasn’t in oil, it was in distillates. The API reported a massive 5.983 million barrel draw that should ease concerns of massive oversupply. Demand has been strong due to farmers harvesting crops way ahead of schedule. We also had an uptick in airline passengers that is probably helping jet fuel demand.

Gasoline supply also was reported lower by 1.622 million barrels. If the EIA confirms, the gasoline supply will fall further below the average range for this time of year. 

Russia suggests that it’s too early to commit to an extension of the OPEC+ cuts, yet suggest they’re open to it if the market prospects don’t improve. The JODI Oil World Database reported that Russia registered its historic low production over the previous 3 months. Russian crude oil production in August rose MoM by 413,000 barrels per day (bpd) to 9.22 million bpd. Russian crude oil refinery intakes in August rose again month-on-month by 82,000 to 5.46 million bpd.

Saudi Arabia's total oil products closing stock level in August rose sharply month-on-month by 8.06 million barrels to 89.50 million barrels. The Saudis have been storing up until demand improves. Saudi total oil products demand in August rose month-on-month by 170,000 to 2.55 million barrels

According to JODI, having hit its all-time high in June, Chinese crude oil imports have fallen over the 2 consecutive months by 1.77 million bpd to 11.21 million bpd.

Don’t miss out on my wildly popular trade levels on all major markets as well as special subscriber-only updates. Call me at 888-264-5665 or email me at pflynn@pricegroup.com.

 

About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.