Yesterday (Wednesday), the DOE reported a 4.84 MMbbl build in crude oil inventories, blowing away analyst expectations of a 1.2 MMbbl build. The API had reported a (comparatively better) 2.12 MMbbl build on Tuesday night, and last year saw a 3.89 MMbbl draw for the same timestep, so surely the DOE’s number incited a sell-off, right?
Not really… prices were down to 86.20 before the report was released, but settled the day a few hours later at 87.33. If the bulls can rally off this report, their conviction is outstanding, because this was not a bullish report for WTI on the breakdown either.
Stocks at the Cushing, Okla. hub rose by 0.86 MMbbls, the largest build ever recorded for this timestep and well outside the 0.69 MMbbl draw reported for the same week last year.
As we have mentioned ad infinitum, stocks at Cushing are a function of crude oil demand, and builds here imply weakness in the front month spread, which fell to -$1.97 yesterday, its lowest point since September 2010.
As shown in today’s Chart of the Day, this is a stark contrast to the Brent contract, whose front month is trading at a tiny -$0.05 discount to the second month (the first point is the spot contract, which has spiked higher due to Hetco and other physical supply concerns). For the March contract, Brent is trading at a $9.06 premium to WTI as of writing; for the April, a $7.41 premium; and so on for a median premium of $2.66 over the next 30 contracts.