Last night's mixed bag from API has been dominated by 'war premium' in oil prices as WTI bounced off $49 ahead of the DOE report which confirmed that gasoline inventories surprisingly built (+3.42mm vs -1.5mm exp) - the biggest build since January - and Crude inventories drew (though less than API). Crude production in the Lower 48 rose to 9.048mm b/d - a new cycle high.

API

• Crude -7.839mm (-2.2mm exp)
• Cushing +319k
• Gasoline +1.529mm (-1.5mm exp)
• Distillates -157k

DOE

• Crude -6.45mm (-2.2mm exp)
• Cushing +569k
• Gasoline +3.42mm (-1.5mm exp)
• Distillates -1.73mm (-500k exp)

The surprise build in gasoline inventories reported by API (and large draw in crude) were confirmed by DOE but the gasoline build was dramatic...

Total stockpiles of crude and product inventory continue to trend down to the lowest levels since Jan 2016...but still remains extreme...

As Bloomberg notes, looking over a one-year time horizon there is a clear downward trend, with stockpiles falling by around 74 million barrels. More than half of that drop has come in the last five weeks, so things certainly look like they are moving in the right direction for rebalancing.

The stock draw may look impressive on a one-year horizon, but the scale of the problem really only becomes visible when you look back to before the 2014 shale surge. Even after the recent drop, overall stockpiles are still more than 200 million barrels, or 12 percent, above their pre-2014 level.

With the US oil rig count declining for 3 of the last 6 weeks, expectations for a slowing in crude production is building. Crude production in the Lower 48 rose once again to 9.048mm b/d - the highest sicne July 2015...

WTI prices hovered around $49.50 into the DOE print - up from post-API lows around $49...

And RBOB is back down too...

“People are anticipating declines in the inventory data today,” said Hans van Cleef, senior energy economist at ABN Amro. “The statement from OPEC was not that surprising, and now we’re looking again to the next meeting”

“We’re trading within very small ranges at the moment, perhaps the inventory data can give a fresh boost to prices”.