Wednesday’s weekly EIA oil inventory data is worth coming back to on Thursday.
Not only did the EIA report an exceptionally large and unexpected crude draw, it turns out the draw was the largest of its kind for this time of year since 1989.
The snaps via Reuters:
But, if you thought this was a bullish indicator for the oil market, it’s probably time to pause and reconsider.
As Stephen Schork of the Schork Report noted on Thursday, there’s not much evidence to suggest the barrels were drawn due to any real demand from the US refining system.
If anything, it seems, some of the barrels were slated for export out of the US:
It turns out that, as with last week, the breakdown is not that bullish. Of the 9.85 MMbbl draw, 91.55% (or 9.02 MMbbls) came out of the Gulf of Mexico (PADD 3). And considering that refinery utilization in the Gulf was more or less unchanged at 90.3%, and mogas inventories in the region fell 1.02 MMbbls, it does not seem those barrels were in high demand at refineries. On the other hand, crude exports rose 6.32% to 2.22 MMbbls/d, their highest point recorded not just for this timestep, but for any timestep.
Of course, if you’re thinking “since when has the US been a sizeable net crude exporter?” you’d be quite right to be curious. It’s not.
As Schork continues, all of this is nothing more than a routine giant end-of-year tax exercise:
Are those exports a factor of heavy international demand? Nope. So where are those barrels going? Nowhere. As we mentioned in the Omnium Gatherum section of yesterday’s report, these barrels disappear almost every December for end-of-year tax considerations. Come January, we expect them to come flooding back. We would not consider that bullish, and it seems the market tends to agree.
And hence, voila, the all-in-all muted reaction in the oil price — (all things considered, naturally):
Considering a commodity investor’s break-even rate – FT Alphaville
Oil jumps after surprise fall in US stockpiles – FT