Tuesday's API report was simply bearish with builds across the board. Crude oil inventories surged with both gasoline and distillate fuel also building. Crude oil stocks increased more than the industry expectation for a modest build while inventories of gasoline and distillate fuel stocks increased even after a cold blast hit the US East Coast last week. Crude oil imports decreased modestly by 0.338 million bpd into the United States after increasing during the previous week with refined product exports from the US likely below normal from the Gulf region. Total inventories of crude oil and refined products combined were higher on the week as refinery utilization rates decreased by 0.3 percent to 89.2 percent.

The oil complex is mostly lower since the inventory release on late Tuesday afternoon and heading into today’s EIA oil inventory report to be released at 10:30 AM EST on Wednesday. The API report was yet another bearish signal hitting a bearish oil complex as participants await today’s EIA inventory snapshot.

Crude oil stocks increased by 12.7 million barrels versus the market expectations for a build of about 3.5 million barrels. On the week gasoline stocks decreased by 5 million barrels and above the market expectations while distillate fuel stocks decreased by 0.7 million barrels versus expectations for a larger draw.

The API reported Cushing crude oil stocks increased by 2.0 million barrels for the week. The API and EIA have been very much in sync on Cushing crude oil stocks and as such we should see a similar draw in Cushing in the EIA report. Directionally it is bullish for the Brent/WTI spread. The build in Cushing stocks is most likely due to the positive economics for storage trades. With ample surplus storage capacity in Cushing traders are likely initiating storage trades in that location.

My projections for this week’s inventory report are summarized in the following table. I am expecting a mixed picture in inventories this week with another build in crude oil and gasoline and a modest draw in distillate fuel with a small decrease in refinery utilization rates. However, as I have been discussing in the newsletter for weeks storage trades are economical which will result in crude oil stocks building going forward.