Crude oil price continued to recover after the collapse two weeks ago. Slowdown in the build-up of oil inventory, hopes of demand improvement, and expectations of demand/supply re-balance  as OPEC+ began output cut in May are key driving forces. The report from the US Energy Information Administration (EIA) shows that total crude oil and petroleum products (ex. SPR) stocks rose +10.41 mmb to 1377.51 mmb in the week ended May 1. Crude oil inventory gained +4.59 mmb (consensus: +7.76 mmb) to 532.22 mmb. Stockpile rose in 4 out of 5 PADDs. PADD 3 (Gulf Coast) saw a build of 2.32 mmb. Cushing stock added +2.07 mmb to 65.45 mmb, suggesting that the delivery point for WTI crude oil is about 85% full. While it is still possible that storage will be full this month, the increase in Cushing stock has decelerated and production shrank. Utilization rate added +0.9 percentage points to 70.5% while crude production slipped -0.2M bpd to 11.9M bpd for the week. Crude oil imports added +0.41M bpd to 5.71M bpd in the week. Concerning refined oil product inventories, gasoline inventory dropped -3.16 mmb to 256.41 mmb as demand jumped +13.72% to 6.66M bpd. The market had anticipated a +0.04 mmb increase in stockpile. Production slipped -0.45% to 6.71M bpd while imports rose +61.4% to 0.37M bpd during the week. Distillate inventory soared +9.52 mmb to 151.49 mmb. The market had anticipated a +2.9 mmb increase. Demand dropped -1.11% to 3.13M bpd. Production added +2.01% to 5.08 mmb while imports gained +42.98% to 0.34M bpd during the week.


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Released after market close on Wednesday, the industry-sponsored API estimated that crude oil inventory gained +8.44 mmb during the week. For refined oil products, gasoline stockpile dropped -2.24 mmb while distillate rose +6.14 mmb.

A number of OPEC producers raised production ahead of the output cut deal. Among the 10 members who have agreed on joint output cut beginning in May, 4 of them increased supply in April. Production in Saudi Arabia soared to 11.31M bpd, +1.5M bpd higher than the amount in 1Q20. The kingdom agreed to lower output to 8.5M bpd in May and June, followed by less reduction from July. OPEC-10’s aggregate output came in at 27.57M bpd, up from +25.07M bpd in the first three months of the year. The amount was also higher than 26.68M bpd promised in the previous deal which came to an end in March. Concerning non-OPEC producers, Russia’s output rose to 11.32M bpd in April, from 11.3M bpd in the prior month. The oil giant also agreed to lower output of 8.5M bpd in May and June.

Recall that in mid-April, OPEC+ agreed to reduce oil production by an aggregate 10M bpd in May and June. The cut will fall to 8M bpd from July until end-2020, followed by a decline to 6M bpd from January 2020 to April 2022. Participating countries will meet on June 10, 2020 to discuss further adjustment. Same as previous OPEC+ deal, Iran, Libya and Venezuela will be exempted. Mexico accepted to lower output by 100K bpd, while the remaining 300K bpd of its quota will be shoulder by the US.


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