Crude Oil Market Report: Surprise Draw Due to SPR Increase

For the week ending 29 May 2020, US commercial crude inventories declined 2.1m to 532.3m. The week saw another sizeable build in the US Strategic Petroleum Reserve (SPR), which increased 4m. The SPR has increased 6.1m over the last two weeks and currently stands at 647.8m. US crude production took another hit, declining to 11.2 mb/d for the week. US production has now declined a total of 1.9 mb/d since peaking (At 13.1 mb/d) in early March. Net crude imports declined modestly from the prior week to 3,385 mb/d. Finally, gasoline inventories increased 2.8m to 257.8m.

Over the past week, crude oil prices continued to trend higher along with most other industrial commodities. It appears crude oil, like many other asset classes, has been the beneficiary of optimism around the reopening of the major economies in concert with heavy doses of central bank liquidity. With crude prices closing in on $40 per barrel, news is surfacing that certain shale producers are ready to bring back production. Should the recent declines in US crude production level off, or alternatively increase, this would be a very negative development for the market.

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Richard Soultanian

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