WTI Prices Extend Losses Despite Slide In US Crude Production

Oil pries pumped and dumped back tro unchanged ahead of this morning’s official inventory and supply data after hopeful (demand) signs of US-China trade talks battled with fearful (supply) signals from OPEC*+.

“There is a fear that the trade negotiations in Switzerland with China could backfire and turn into a demand destruction event,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA. Building market sentiment that a rate-cut is not in the cards anytime soon is also weighing on prices, he added.

Oil has trended lower since late January due to escalating trade frictions and plans by OPEC+ to keep boosting idled supply, but prices have moved away from their lows in the last couple of days.

DOE

• Crude -2.03mm

• Cushing -740k

• Gasoline +188k – first build since mid-Feb

• Distillates -1.10mm

While gasoline stocks built for the first time in 10 weeks, Crude and Distillates inventories drewdown last week…

As Bloomberg’s Alex Longley reports, total inventories of crude and petroleum products, excluding the SPR, climbed for a second week this week, but the buildup was fairly small. The drop in crude and distillates was countered by another increase in natural gas liquids. That said, the pace of NGL builds slowed after bumper increases in previous weeks. 

Despite the ‘drill, baby, drill’ narrative, US crude production slipped significantly over the past couple of weeks…

Source: Bloomberg

Most of that drop was due to rebalancing the weekly numbers against the latest monthly figures published in the latest Short-Term Energy Outlook, which reduced the weekly figure by 81,000 barrels a day. 

The drop in production comes as the number of rigs drilling for oil fell, with four units taken out of operation last week, according to Baker Hughes. That reduced the rig count to its lowest since January.

The decline production should not be a surprise to readers following DiamondBack’s recent warning:

“This will have a meaningful impact on our industry and our country,” Diamondback Chief Executive Officer Travis Stice wrote.

“We believe we are at a tipping point for U.S. oil production.”

WTI is slipping lower this morning, extending losses after the official data…

When will the lower crude prices ripple through to lower pump prices?

And lower inflation (and expectations for all those UMich-responding Democrats).