WTI Slides After Big Crude Build, 7th Straight Weekly SPR Drain By Biden Admin

Oil prices have whipped around overnight since API reported a big crude build (and Cushing stocks soaring) as hopes for debt ceiling deal trumped the latest (weak) China demand signals.

The International Energy Agency on Tuesday said it expects demand to outstrip supply by more than two-million barrels per day in the second half of 2023. The prediction is being widely ignored by the market as it remains focused on a potential US debt default as debt-ceiling negotiations continue, while slowing OECD economies amid rising interest rates raise recession worries.

API

• Crude +3.69mm (-800k exp)

• Cushing +2.87mm – biggest build since Jan ’23

• Gasoline -2.46mm (-1.3mm exp)

• Distillates -886k (unch exp)

DOE

• Crude +5.04mm (-800k exp) – biggest build since Feb 2023

• Cushing +1.46mm – biggest build since Jan 2023

• Gasoline -1.38mm (-1.3mm exp)

• Distillates +80k (unch exp)

Confirming API’s report, the official data showed big builds in total crude stocks and at Cushing while Gasoline inventories drew down as expected…

Source: Bloomberg

While the Biden admin proclaimed their intent to buy 3mm barrels to start refilling the SPR this week, they drained another 2.4mm barrels – the 7th straight weekly drain (draining 11.993mm barrels)

Source: Bloomberg

US Crude production was flat at cycle highs despite the ongoing slide in rig counts…

Source: Bloomberg

WTI was hovering around $71.80 ahead of the official data, and extended losses on the crude build…

“Crude oil continues to trade with a negative bias on near-term demand concerns, especially in China, and the US debt ceiling debacle which is lowering the general level of market risk appetite. The IEA concluded the monthly batch of oil market reports by joining OPEC in saying global oil demand in 2023 will be stronger than previously expected, rising by 2.2m b/d to a record 102m b/d as China demand recovery surpasses expectations, clearly not a view that is being shared by the market at large,” Saxo Bank noted.