WTI/RBOB Slide On Russia Oil-Cut Rollbacks, Surprise Inventory Builds

After last week's biggest inventory build since 2008, headlines confirming Russia is seeking a roll-back of oil-cuts saw selling pressure ahead of the API data which confirmed last week's surprise builds in crude, gasoline, and distillates.

Bloomberg reports that Russia plans to propose that OPEC and its allies be allowed to return production to October 2016 levels, rolling back most but not all of their output cuts within three months, according to a person familiar with Russian thinking.

The nations would proportionally share out a 1.8 million barrel-a-day increase to their output limit starting as soon as July, the person said, asking not to be identified because the information isn’t public. The actual boost in supply to the market would be less than that because some states, notably Venezuela, Angola, and Mexico, aren’t able to increase, the person said.

Additionally, next year, the U.S. government doesn’t see worldwide or U.S. crude production as high as it once did. The Energy Information Administration decreased its 2019 forecast for global production to 102.21 million barrels a day, with most of the downward revision from OPEC.

“Overall, where we’re at, is continuing to call into question just what the ultimate outcome will be of the OPEC meeting,” said John Kilduff, a partner at Again Capita LLC.

“The opposition that you’re seeing from several OPEC members has given the market some pause about continuing to sell off here.”

API

  • Crude +833k (-1.25mm exp)

  • Cushing -730k (-900k exp)

  • Gasoline +2.33mm

  • Distillates +2.1mm

EIA-reported builds in Crude, gasoline, and distillates last week shocked markets, and this week confirmed that surprise in API data...

OPEC decisions remain on everyone's mind but inventory data is spoiling the short-term fun and games.

“Our best guess is currently that there will be no formal decision to change the production target, but a rather a type of agreement or understanding that compliance will be relaxed,” said Johannes Benigni, chairman of JBC Energy Group in Singapore.

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