Unchanged In Asia; OPEC+ Announcement Underwhelms, U.S. Inventories In Focus

WTI and Brent are virtually unchanged, operating at the upper end of Thursday’s range at typing.

• To recap, both benchmarks rose from their respective one-week lows on Thursday as a widely-watched OPEC+ announcement re: collective crude production quotas for July ultimately underwhelmed, keeping in mind the preceding rash of media source reports on the possibility of a Saudi-led, immediate increase in production.
• Elaborating on developments within OPEC+, the ~50% increase in production quotas announced by the group effectively symbolise the compression of September’s quota increases into July and August, with debate re: the ability of OPEC+ to meet even current targets doing the rounds, keeping in mind well-documented difficulties that some members have continued to face in ramping up production.
• WTI and Brent nonetheless remain off of their May 31 highs, with the recent rally capped by warming U.S.-Saudi ties, as well as previously flagged reports of smaller-than-projected declines in Russian crude exports (due to rising Asian demand).
• Elsewhere, U.S. EIA inventory data crossed on Thursday, pointing to a larger-than-expected drawdown in crude inventories (against WSJ estimates), with overall levels now sitting ~15% below the 5-year average. Declines were also observed in gasoline and distillate stockpiles, while there was a build in Cushing hub stocks.
• Gasoline and distillate stocks across the U.S. are coming under severe pressure, with BBG reports flagging that gasoline supplies in the NY region have dipped to their lowest level seasonally since 1993, while diesel supplies on the East Coast have fallen to their lowest levels on record (since 1993). With refinery utilisation rates across the country already coming in above >90%, the outlook for tighter gasoline and distillate supplies in the U.S. (and thus higher prices for oil products) have accordingly renewed debate re: demand destruction.