Crude oil markets seem to have stabilized after oversupply in Spring, but the future appears uncertain. End-product demand has stabilized but is not recovering as quickly as some hoped, as inventories of crude products such as gasoline, jet fuel, and diesel saw builds in the week ending May 29th. Oil prices have strengthened in recent days, however, on production cuts and international and domestic demand recovery, including stronger-than-expected U.S. unemployment figures. WTI prices are even flirting with $40/barrel, for the first time since early March. The single most important trend to watch, however, is the consequence of the physical distancing breakdown. As Americans resume normal modes of behavior, we could see a return to typical driving patterns (and higher demand for crude and crude products) – or a second wave of COVID-19 infections, which would likely crush demand. On balance, U.S. crude oil’s future is more uncertain than a week ago.
Crude storage draws in Cushing
U.S. weekly stocks of crude oil, excluding the Strategic Petroleum Reserve (SPR), totaled about 532.2 million barrels for the week ending May 29nd, down by about 2 million barrels from the prior week. According to the U.S. Energy Information Administration (EIA), the SPR received injections of 4 million barrels, as total U.S. crude stocks (including the SPR) rose by about 2 million barrels.