WTI reached a fresh 2.5 year high at $58.05 overnight following a bullish API report and a lack of clarity surrounding the Keystone pipeline that’s backing out roughly ½ million barrels/day from the US. Expectations that OPEC will extend output cuts in their Nov 30 announcement have also been cited for the recent strength, although that expectation has been making the rounds for months, leaving some concern that oil prices could crumble if the cartel fails to impress.
The API report was said to show a 6.3 million barrel decline in crude oil inventories, a 1.8 million barrel draw in Cushing OK crude stocks, a decline of 1.6 million barrels for diesel inventories, while gasoline stocks grew by almost 900,000 barrels. The overnight price action has been proportionate to the API report, with WTI leading the move higher trading up 2% and reaching that new multi-year high, while ULSD Prices are up close to 1% at $1.95 while RBOB gasoline is struggling to break even.
Work is underway to repair and restart the Keystone pipeline that’s been shut since a leak that was classified yesterday as “sudden and significant” spilled around 5,000 barrels of oil in South Dakota last week. With no timeline for restart, expect roughly 4 million barrels/week of Canadian imports to be backed out. We’ve already seen crude oil prices react with the WTI/Brent spread shrinking to a 6 week low, along with increased premiums for replacement barrels in several US spot markets, and we’ll likely see the effects in the next couple of inventory reports. This week’s DOE report is due out at 9:30 central.
Several US Stock indices reached new all-time highs yesterday, giving many investors something to be thankful for this week. While you could argue that the 2.5 year high in WTI coinciding with that move is no coincidence, the correlation between the asset classes remains quite low.