DAILY ENERGY REPORT
US crude inventories, Bank of England's rate hike, Russia’s oil exports, China’s product exports amid slow industrial activity, climate financing for developing countries, and more
CHART OF THE DAY: How Relevant Are Cushing Oil Inventories to Oil Markets?
Summary:
After declining to critical levels, crude inventories at Cushing, Oklahoma, have recovered to their highest level since the second week of June 2021, as shown in Figure (1) above.
EOA’s Main Takeaway:
After 8 weeks of consecutive increases, inventories declined last week by a small amount of 98,000 b/d.
The boost in inventories over the past weeks was the result of outages, maintenance work, and an increase in imports of Canadian crude.
Cushing, where WTI is priced, is one of the most important hubs in the oil industry. It is where major oil pipelines meet, and where key storage facilities and the main distribution center of crude are located. Although the shale revolution reduced its role, Cushing remains an important oil hub. From Cushing, oil makes its way to refineries near Houston in Texas.
WTI has become more of a regional marker than an international marker. Adding WTI to Brent calculations doesn’t make a global marker anyway.
STORY OF THE DAY: Unexpected Build in US Crude Oil Inventories
Summary:
The Energy Information Administration (EIA) reported today a surprise crude draw of 3.8 mb to 463.3 mb. It also reported a withdrawal from the SPR by 1.7 mb to 350 mb. That brings the total of recent releases to about 21.8 mb. All the recent releases were sweet crude (see Figure 2 below). We said last week: “It seems one of the companies that borrowed crude from the SPR earlier this year has returned 800,000 barrels of sour crude”. Now we found out that the EIA reported the wrong number and nothing was returned. Sour crude inventories remain at 203.2, and not 204 as the EIA reported last week.
The EIA reported a build in gasoline inventories by 0.5 mb to 221.4 mb. Distillate inventories, meanwhile, increased by 0.4 mb to about 114.3 mb.
EOA’s Main Takeaway:
There has been another release of 1.7 mb from the US Strategic Petroleum Reserve (SPR) as part of the 26 mb congressionally mandated sales for this year. An additional 4.8 mb will be released between now and the end of June.
The adjustment number remains high at 13 mb. As we stated before, the EIA is NOT able to solve this problem.
NEWS OF THE DAY
1- REUTERS: Oil plunges 4% as interest rate hikes outweigh lower US oil supplies
Summary:
Oil futures dropped around 4% today, as the Bank of England's rate hike triggered concerns about the economy and fuel demand, Reuters reported, adding that this “outweighed support from a surprise draw in U.S. oil supplies."
EOA’s Main Takeaway: