WTI/RBOB Soar After Huge Surprise Crude Draw (Despite Production Surge)

Despite Russia production-cut roll-back headlines, WTI/RBOB prices are unchanged from the huge, bearish surprise API-reported inventory surge. However, for the 2nd week in a row, DOE data was entirely opposite and showed a big crude and gasoline draw. Markets ignored the 100k b/d surge in production...

Bloomberg Intelligence Senior Energy Analyst Vince Piazza notes that a potential agreement by OPEC to increase oil output when it meets later in June is curtailing the crude rally from earlier this year, while prices in earshot of $80 a barrel weigh on demand and threaten economic growth.

Bloomberg reports that OPEC and its partners will meet next week and debate whether to restore output halted last year. Saudi Arabia and Russia have said it’s time to reverse the cuts and appear to have begun reviving supplies, but face opposition from Iran, Iraq, and Venezuela.

“There is no need for a change in the level of production,” said Iran’s OPEC governor, Hossein Kazempour Ardebili, who serves as one of the country’s representatives to the group. “Any increase should be limited to the production allocation in the agreement, which is valid to the end of 2018.”

Oil’s recent rally to a three-year peak above $80 a barrel in London has prompted warnings that prices could hurt economic growth. Yet Kazempour insisted that OPEC will resist pressure to raise production.

“The Trump administration is trying to intervene in the affairs of a sovereign organization,” he said. Such attempts have failed in the past and “they will also fail” this time.

API

  • Crude +833k (-1.25mm exp)

  • Cushing -730k (-900k exp)

  • Gasoline +2.33mm

  • Distillates +2.1mm

DOE

  • Crude -4.143mm (-1.25mm exp) - biggest draw since March

  • Cushing -687k (-900k exp)

  • Gasoline -2.271mm (+1mm exp)

  • Distillates -2.101mm

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