USA crude stocks swell as tankers from Saudi Arabia unload: Kemp

Andrew Cummings
June 1, 2020

US oil production continues to fall sharply, as operators shut wells and reduce capital expenditures to cope with the worst crude price crash in decades.

Domestic crude production was estimated to have fallen again last week to just 11.4 million bpd, slowing sharply from more than 13.0 million bpd at the beginning of March.

Demand increases are coming as USA production continues to plunge and report overnight that OPEC oil production has crashed by 6.3 million barrels per day (BPD) to 23.75 million BPD in May, according to JBC data. US President Donald Trump said his administration will begin to eliminate special treatment for Hong Kong in response to China plans to impose new security legislation in the territory, but he did not say the first phase of the Washington-Beijing trade deal was in jeopardy.

"The armada of ships bringing Saudi crude to the US has arrived", said Amrita Sen, a director at Energy Aspects, a consultancy.

According to the EIA, US crude oil production averaged 11.4 million barrels per day (b/d) last week, down by 100,000 b/d from previous week and down by 900,000 b/d this time a year ago. "But we'll be showing the photographs for years".

OPEC+ producers gave the market a confidence boost by following through on commitments to crude oil output supplies cuts.

"While we're seeing signs of global demand recovery, we're still in the early days of a long road to full recovery, and the outlook remains uncertain on whether there could be a second wave of coronavirus", Huang said. At 16 million bpd it was a quarter lower than a year earlier. The US' crude oil output reached an all-time high of 13.1 million bpd for the week ending February 28. This ate into some storage capacity, but utilization rates remain well beneath the high levels that sparked WTI's collapse below zero last month.

But distillate stocks continued to surge, increasing more than 5 million barrels, and are now up by 42 million barrels since the economy went into lockdown. Last month, Saudi shipments surged as the kingdom edged out other exporters to the South Asian nation, notably Iraq.

Oil fell as crude was swept up in the broader negative sentiment around deteriorating U.S.

"Capitalism is buying cheap crude from the lowest-cost seller", said Book.

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