WTI Holds Near 6-Month Highs Amid Gulf Shut-Ins, Inventory Draws

WTI Holds Near 6-Month Highs Amid Gulf Shut-Ins, Inventory Draws Tyler Durden Tue, 08/25/2020 - 16:35 Oil prices were higher today, driven in large part by significant shut-ins across the Gulf of Mexico. WTI traded back above $43. As Bloomberg's Kriti Gupta details, the Gulf of Mexico is responsible for 17% of U.S. offshore oil production, 82% of which has been shut in preparation for the storm (up from 58% yesterday). So the simple explanation for rising crude is less production means less supply and higher prices. It gets even thornier when you consider that 45% of total U.S. petroleum refining capacity also is located along the Gulf Coast. This is unlikely to be reflected in any inventory/production data released this week. API * Crude -4.524mm (-4.3mm exp) * Cushing -646k * Gasoline -6.392mm (-2.7mm exp) - biggest draw since April 2019 * Distillates +2.259mm (-700k exp) Analysts expected a fifth weekly crude draw in a row and a continuing trend of draws in Gasoline stocks also... API reported bigger than expected draws for Crude and Gasoline (with the latter's biggest drop in stocks since April 2019)... Source: Bloomberg WTI closed at its highest for the front-month contract since early March... Source: Bloomberg Oil was trading around $43.35 ahead of the print, and was little changed after the data. "Markets know that the hurricane shut-ins are usually transient, and it's a bit too early to know whether the current ones will have a prolonged bearish effect on prices or not," said Bjornar Tonhaugen, head of oil markets at Rystad Energy, in a daily note. "Refineries might need to shut-in more runs due to flooding than upstream operators shut in crude supply," so weaker demand for crude at the refineries may help to offset price-bullish supply constraints.
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