Crude inventories were flat this week
However, excess crude inventories, as measured by seasonally-adjusted days of turnover, have fallen by 14 mb since early March
The administration has resumed draws from the SPR. What's the logic of that?
Product inventories are normal
Crude and key product inventories, taken together, have fallen by 22 mb since early March as measured by seasonally-adjusted days of turnover, and now stand at only 12 mb, which is effectively nothing in practical terms.
Total, gasoline, and jet fuel supplied (consumption) all look good by recent comparisons, particularly jet fuel
If the US is heading into recession, it is not apparent in the oil consumption data, where we would expect to see it
US crude and condensate production rose by 0.1 mbpd to 12.3 mbpd, materially unchanged in the last ten months
The EIA sees US crude and condensate production flat through Q3, rising modestly in 2024
This seems rather optimistic, given that US rig counts have been declining for 17 of the last 18 weeks. If rig counts are down and spread counts are flat, where is US production growth coming from?
Indeed, the EIA's April STEO sees February US crude and condensate production as the high point through Q3. Given the EIA's flat oil price forecast, the impetus for higher rig and spread counts appears to be lacking. As a result, for the moment, it looks like February 2023 crude and condensate production may be penciled in as the US peak (excluding NGLs) for this cycle.
Oil prices have risen sharply on OPEC production cuts.
The futures curve is now in more decided backwardation, and storage incentive analysis suggests the traders expect oil markets to be largely in balance for the rest of the year, that is, current pricing looks sustainable