US crude oil stocks rose 6.5 m bl last week with Gasoline and Distillate stocks down 2.0 and 0.8 m bl respectively. In total the three were up 3.7 m bl but the market had expected a total draw for the three of 5.8 m bl following the US API indicative numbers Tuesday night. What is important to note is that stocks are rising in the US and the reason is because pipes out of the US for exports are maxed out while US production is rising. The US still needs to import medium sour crude to meet the crude specs of US refineries as these refineries probably now are close to max of what they can process of ultra-light sweet shale oil crude.
The increase in US crude stocks is thus not so much an expression of a global surplus in crude being backed up in the US because there is no need for it in the global market place. It is backed up in the US because they cannot get it out. So if more and more crude oil in the US is backed up like this it basically means that less is floating to the global market.
Yesterday the WTI price declined 3% to $69.75/bl while the Brent crude price only declined 1.7% to 80.05/bl. Brent was dragged lower by the bearish sentiment in US crude and WTI but WTI is now trading more than $10/bl below Brent.
It is clear though that inventories are not drawing down in H2-18 as expected but that could very well be front loading of production by Saudi Arabia and its allies in order to counter the Iran sanctions which will remove oil from the market in November onwards.
Ch1: WTI discount to Brent now more than $10/bl