Twilight Zone, What's An Oil Storage Report?
Oil market fundamentals? What's that?
I feel like I'm in the twilight zone. In last week's OMF, we discussed how it was one of the more bullish oil storage reports I've seen since 2022. Fast forwarding to today, and the bullish inventory draws continue. Now granted, it's only 2 reports, so more is needed, but there are a few key variables we think readers should be aware of:
US implied oil demand is better than expected.
EIA re-benchmarked US oil production higher, but this does not mean US oil production increased.
Product storage is accelerating lower as refinery maintenance is underway and product demand is better than expected.
To put the figures into perspective, over the last 4 reports, US total liquids including SPR declined by ~27 million bbls. The equivalent 5-year average is a draw of ~15 million bbls. We are drawing at almost double the rate or close to ~1 million b/d.
This is why I think the market is completely disconnected from fundamentals. Seriously, at this point, you have to conjure up crazy stories like peaking Chinese oil demand to convince yourself that oil prices are destined for doom.