The rally in the oil market appears to be running out of steam, at least for now, as ICE Brent settled a bit below $90 a barrel yesterday and came under some additional pressure in early trading this morning. The continued strength of the dollar will likely create some headwinds, not just for oil, but for commodities in general.
EIA’s weekly inventory data, which was delayed by a day due to a holiday earlier in the week in the US, was quite constructive. U.S. commercial crude oil inventories fell 6.31 million barrels over the past week, leaving inventories at just under 417 million barrels, the lowest level since December. The biggest drop was driven by strong crude oil exports, which increased by 404 Mbbls/d WoW to 4.93 MMbbls/d. Meanwhile, refinery run rates continue to decline as we move into the refinery maintenance season. On the products side, gasoline inventories fell 2.67 million barrels to just under 215 million barrels, levels last seen in November. Gasoline inventories should begin to rise as we move out of the driving season, although we will likely have to wait until after refinery restructurings to see more significant increases. Distillate fuel oil stocks increased by 679 Mbbls over the week, which will again provide some comfort to the market as we head into the winter months, although distillate stocks are still well below the 5-year average.
The latest Chinese trade data yesterday was favorable. It shows that crude oil imports during August averaged 12.48 million barrels/d, up 21% from a year ago and 31% above year-ago levels. While we have seen a buildup of stocks for much of the year, refineries have also been operating at higher rates, due to stronger domestic demand as well as increased exports. Exports of refined products during August amounted to 5.89 million tons, a year-on-year increase of 23%. This leaves accumulated exports of refined products during the first eight months of the year at 42.51 million tons, almost 43% more year-on-year.
Natural gas prices could rise today with the strike at Chevron’s Gorgon and Wheatstone LNG facilities starting today. This strike was originally scheduled to begin yesterday, but was delayed due to ongoing negotiations. However, this morning the Offshore Alliance said that the strike will begin today at 1:00 p.m. local time. In the initial phase of action, only partial strikes will occur. However, this will increase over time with rolling 24-hour strikes starting from September 14.