Saudi oil imports fuel record rise in US crude stockpiles
United States crude oil stockpiles rose unexpectedly last week to hit an all-time high as refiners boosted imports, particularly from Saudi Arabia, while exports dropped to lows not seen since November.
The US Energy Information Administration also said on Wednesday that refined product demand ticked up, but still remained far below normal levels.
Crude inventories rose 5.7 million barrels in the week leading up to June 5, surging to 538.1 million barrels - the highest level on record, not including the US strategic reserves, EIA data showed.
Shipments booked during the Saudi-Russia price war from March and April have been arriving in the US. Refiners' imports of Saudi barrels have averaged more than 1.5 million barrels per day (bpd) for three consecutive weeks, which has not happened since 2013.
In March, Riyadh announced it was lowering the price it charges for oil and would start pumping crude with abandon after it failed to convince Russia to agree to steep output cuts to offset a 30 million-barrel-a-day blow to demand from the coronavirus pandemic.
The price war sent already pressured crude prices crashing. At the height of the rout, prices of US benchmark West Texas Intermediate crude turned negative as traders paid to have oil taken off their hands rather than risk having nowhere to park it as storage facilities neared capacity.
Faced with a potential wave of bankruptcies among higher-cost US shale oil producers, US President Donald Trump, who is seeking re-election this year, personally appealed to Saudi Arabia's de facto leader, Crown Prince Mohammed bin Salman, and Russian President Vladimir Putin to reach a deal and rebalance the market.
Following Trump's intervention, the Saudi-led Organization of the Petroleum Exporting Countries and its allies led by Russia agreed to record-breaking production cuts of 9.7 million barrels per day (bpd) for May and June. The grouping, known as OPEC+, agreed on Saturday to extend those curbs through July to keep propping up prices.
But inventory build-ups continue to weigh on prices.
Crude inventories in the Gulf Coast import-export and refining hub jumped 6.9 million barrels in the week to June 5 to a record 303.7 million barrels. US exports fell to 2.4 million bpd, their lowest since November, so overall net crude imports rose by 1 million bpd, the EIA said.
"These are bearish numbers really. Crude [stocks] rose again despite being stymied by subdued demand. We are down significantly from a year ago today and saw builds in products as well," said Matt Smith, director of commodity research at ClipperData.
Gasoline inventories rose 866,000 barrels, compared with analysts' expectations for a 71,000-barrel rise. Distillate stockpiles, which include diesel and heating oil, increased by 1.6 million barrels.
Product supplied, a proxy for demand, showed gasoline consumption rebounded to 7.9 million bpd, still roughly 20 percent below the year-ago period, but an improvement from recent weeks. Overall gasoline demand is down 16 percent from a year ago.
Refinery utilisation rates rose by 1.3 percentage points to 73.1 percent of capacity.
The market was lower after the data. US crude futures fell 2 percent to $38.18 a barrel, while Brent was down 1.4 percent to $40.60 a barrel.