Largest Drop In Crude Oil Inventory Levels Of The Year

Surprise! Across-the-board draw-downs in the headline inventory levels pushed the energy complex higher yesterday morning. The uptick in demand estimates resulted in gains of around 1.5 percent to two percent for prompt month refined product contracts and 2.2 percent for the American crude oil benchmark.

The decrease in imports and increase in exports caused the largest drop in crude oil inventory levels of the year. WTI futures likewise hit four month highs yesterday morning and are now just under one dollar away from closing the six dollar chart gap caused by pandemic concerns back in March.

Diesel days of forward cover (i.e. how long current stockpiles could cover current demand if supply went to zero) have almost returned within their five-year seasonal range after setting new seasonal highs for the past 14 weeks.

The fundamental question going forward is whether or not the increase in demand, if sustained, can absorb the additional supply that is expected to hit the market once OPEC+ trims down their production cut. A sizable uptick in supply amid renewed economic closures could be enough to fizzle the three-month long recovery in energy prices.

Click here to download a PDF of today's TACenergy Market Talk.