Once again, US EIA data recorded a crude inventory build above expectations while product draws exceeded expectations and demand was a bit stronger YoY.
The 2.1mmbbl build in crude was significantly less than the 6.6mmbbl build reported by the API on Tuesday but still took crude inventory to 382mmbbl, the highest since 1990. Crude inventory at Cushing also increased to record levels (45.1mmbbl) which probably helps explain why WTI is again weakening against benchmark Brent despite the imminent start-up of the Seaway pipeline reversal.
Implied US all product demand rose 0.4mmb/d WoW (+2.2%) to 19.0mmb/d and, despite still being weak, has remained within the prior five-year range for six weeks now. Cumulative demand for the YTD is still down 3.9% YoY but the 52-week cumulative decline is easing. Falling on-road fuel prices might help the summer driving season which, by tradition, starts on Memorial Day, the last Monday in May. However, at USD 3.75/US gallon, gasoline remains expensive by US standards.
That US crude inventories are ample to excessive is not new news and while we are beginning to see a pick up from very low inventory levels everywhere else, that process might need to develop further if the pressure on oil prices is to be maintained; we believe that process is underway and will be sustained until Brent falls further toward the USD 100/bbl mark.