U.S. commercial crude stocks fell last week amid sharply lower production, as the probability of a disastrous storage max-out continues to decline. End-market demand shows signs of strength, as gasoline demand rose again. Still, crude imports and refinery inputs of crude oil, particularly in PADD 3, showed signs of weakness. This mismatch in crude inputs and gasoline demand will have to be resolved one way or another in the coming weeks. A growing glut of diesel inventories could also weigh on refinery operations and lead to diverging outcomes in gasoline and distillate markets.

We believe it is still too soon to declare victory in the battle against storage max-out. Even though the probability of reaching tank top continues to decline, the public health crisis continues to drive all economic outcomes, including in energy markets. Will a second wave of COVID-19 infections hit the U.S. and other key markets as societies emerge from lockdowns? How much personal risk will consumers tolerate? Uncertainty from COVID-19 continues to dictate market outcomes. The probability of a storage tank max-out is clearly lower than even three weeks ago, but it is still too soon to declare victory.