Crude Inventories: Highest Level On Record

Inventories Build Again

The latest report from the Energy Information Administration showed that US crude stockpiles rose to their highest level on record in the week ending June 5th.

Crude levels rose by a further 5.7 million barrels to 538.1 million, marking a record build.

Crude demand has been heavily impaired this year due to the COVID-19 lockdowns. And, given that demand had already been weakened by the two-year US/China trade war, the market has been steadily moving deeper into a state of oversupply.

Spike in Imports

The EIA noted that the increase in stockpiles was a result of a large increase in imports. More specifically, the imports from Saudi Arabia, while export levels had fallen sharply.

Imports agreed upon during the March-April period when prices had crashed due to the Saudi-Russia price war, have been arriving in the US. This has led to the uptick in stockpile levels.

Refiners noted an increase in Saudi imports of an average of 1.5 million barrels per day for the last three weeks. The last time we saw a streak of imports at this level was in 2013.

Regionally, the Gulf coast import/export center saw the highest increase in inventory levels. Inventories rose by 6.9 million barrels over the week to a record of 303.7 million barrels.

Refinery utilization rates rose by a further 1.3% over the week. However, they still sit at just 73.1% of total capacity.

The report also showed that US exports fell by 2.4 million barrels per day. This marks their lowest level since November 2019. Meanwhile, crude imports were higher by 1 million barrels per day.

Gasoline & Distillate Stocks Rise

Gasoline inventories were also higher over the week rising by 866k barrels. This was well above the 71k barrel increase forecast.

Once again, this reflects a slowing down of demand for fuel, despite lockdown restrictions easing across parts of the US. Distillate stockpiles were also higher last week, rising by 1.6 million barrels.

The report also noted that products supplied picked up a little to 7.9 million barrels per day. This is usually used as a proxy to gauge the overall demand for gasoline.

However, the number is still sitting at around 20% lower than the average price this time last year. This reflects the severe drop in activity as a result of the COVID-19 crisis.

Crude Holding Despite Bearish EIA Report

Crude prices continue to hold around the 61.8% retracement of the drop from 2020 highs. While the 33.17 level holds as support, further upside is likely with the 42.43 level the next resistance to watch. To the downside, any break of the 33.17 level will put focus back on the 28.94 level as the next support zone to monitor.