Energy prices continue to chop back and forth this morning after a Wednesday rally failed to sustain itself, and an overnight sell-off was also unable to hold.
Yesterday’s action seemed to be a tug of war between falling crude stocks in the US, and the OPEC monthly report that showed the cartel’s production continues to grow at a rapid pace, even though they’re largely in compliance with their deal to cut production.
The headline draw of more than 7 million barrels of crude oil inventory in the DOE’s weekly status report sparked an immediate push higher with crude up $1.5/barrel and refined products up 3 cents. That strength didn’t last long however as record setting refinery production and growing crude oil output put a stop to any ideas that the inventory overhang will be going away any time soon.
Gasoline and Diesel production both reached their highest levels of the year last week, and diesel output reached an all-time high. While gasoline demand estimates remain robust, refiners are still heavily relying on exports to place their production, and inventories remain nearly 20 million barrels above the 5 year average.
Production What? The OPEC Monthly report showed an increase of nearly 400,000 barrels of production per day for the cartel, with gains from Libya, Nigeria (who are exempt from the production cut deal) and Saudi Arabia making the production cut agreement largely irrelevant.