evening wrap, may 20
market vibes
Crude traded a litlle heavy in the overnight session despite an abundance of panicky X posts about Cushing inventories and more “tank-bottom” from Currie. Cushing is actually well supplied historically. It’s the WTI benchmark, an old tank farm in decline operating at about 35% of capacity and 25 mm bbls is more than ample operationally. Currie does know this. It’s his job to know it. He owes it to audiences to say it.
A little after 10 EDT prices traded down $5/barrel on news that Trump thought the final stages of a deal are near. I did not see and postings on his Truth account. But futures are heavily long, prices are settling under the June expiry settlements and open interest is falling apace.
DOE Wednesday data
As usual every Wednesday morning the DOE updates the markets on the US oil industry. This is their report for the week ending May 15.
Crude inventories fell 7.86 mmbbl to 445 mmbbl which is 27 days of supply, more than ample by historical standards. Rbob and distillates were unexceptional.
Cushing fell 1.6 mm bbls to 25.8 mm bbls perfectly operational and well above levels we’ve seen many times going back to the GFC.
Domestic production held steady at 13.70 mbpd, imports were solid at 6.02 mbpd, and exports remained robust at 13.09 mm bpd (5.60 mbpd crude + 7.49 mbpd gas liquids and products).
Total refinery runs were close to red lining again at 91.6% utilization and PADD 3 was off the charts at 97.2%. This is max output capitalizing on exceptional margins, especially cracking record output of jet fuel. “All Products Supplied” (demand proxy) rose to a moderate 20.45 mbpd which is normal to seasonal demand… no signs of demand destruction or pricing stress anywhere in the system including superb exports.
In my opinion… the U.S. industry is in very good shape: easily covering domestic requirements, running profitably for export markets, and operating with a comfortable 27 days of stocks to US crude inventory. PADD 3 (Gulf Coast) 97.2% utilization is not sustainable forever but these guys know what they’re doing. If cracks moderate refiners will ease up to do some maintenance. Bottom line… the US is a resilient, high-output system that’s doing exactly what it should in a strong demand environment.
the skinny on the spr
The DOE is releasing 172 million barrels of SPR oil with swaps rather than outright sales. Companies borrow SPR crude now and they pay it back plus a premium in more barrels later which based on the curve could be as much as 25% more barrels. This is explicitly designed to grow the reserve by at least 200 million barrels “at no cost to the taxpayer” and it will.
These are not “draws.” They are loans. The swaps are repaid ratably from November 2026 through September 2028. Earlier return structures have lower premiums.
I like Liz Sonders. I don’t know her but I respect her. Her statement “the largest drop on record” in the context of our travails with the IRGC is specious and careless misinformation for someone of her caliber. She’s obviously parroting a Bloomy post which is actually just shitty AI.
BBG is bundling a largish but very healthy commercial inventory draw with DOE loans of SPR oil repo’d by contract according to a strict term sheet and managed by the IEA. This is about as clickworthy as continuing claims tomorrow.
The reality is US refiners are aggressively earning money for their shareholders, professionally managing inventories and doing what they are paid to do. The DOE is honoring a commitment to lend a fixed amount of oil to the market every day.
These bots are just like silver in January when the bots were hyping it…
in the markets
July WTI traded down to a recent short-term POC on Trump’s “maybe a deal” comments. If the deal develops tonight, $86 is the next support. A break under $77 would be a new low since March 10 which would have negative implications for longs in WTI. I don’t think Trump has the cards to bomb Iran and I think they know it. More in the vibe.
Elsewhere the President’s brief impartation rallied metals, stocks and bitcoin. Treasury yields fell.
my vibe
Anyone making prices in the pit or showing a price to an RFQ on a trading desk knows you do not ever negotiate. You are the liquidity provider. If you do not defend your spreads they will never deal on your prices... They will walk away... This is a lesson many never learn because they ask for prices… they take prices… but Trump knows... he knows... The one who walks away has already won.
If I could… I would say “Dude, do us a favor. Time to go home and leave the keys under the mat.”
younger you (goes nicely with a sip of whiskey)
night all… good luck in asia
JJ
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Thank you for your thoughts and insights JJ! Like most of us here, I get spammed everyday with emails but this is one I look forward to reading each time you send.
She’s obviously parroting a Bloomy post which is actually just shitty AI.