News

1) Let’s cut to the chase; that was a pretty epic weekly EIA inventory report. The 14.5 million barrel draw to crude inventories was the second-largest on record, and the largest since January 1999. The draw took many by surprise, although we reported to clients last Friday that we expected a draw of over 10 million barrels.

The draw was driven by tropical activity in the Gulf of Mexico, and specifically Hermine. Imports into the US Gulf dropped by a whopping 760,000 barrels per day on the prior week, while imports to PADDs 1, 3 and 5 dropped by a whoppingly whopping 1.87mn bpd.

In addition to the storms materially impacting imports, we also saw temporary shut-ins in the Gulf causing a drop of ~150,000 bpd in production. To add further bullish hues to this report, refinery runs increased to their highest level since August 2015 at 16.93mn bpd, while gasoline inventories drew down by 4.2 million barrels.

2) Before we revisit production freeze prognostications, let us check on the scores on the doors for OPEC oil exports for August…and they are once again at a new record. Funny that:

3) The potential variances involved with a production freeze are huge. If Iran, Nigeria, and Libya were exempt from any production freeze, then we could in theory still see another over 2 million barrels per day of production coming to market in spite of everyone else freezing.