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The only number that matters for oil markets this week is 10.25m. The US has now broken above 10m b/d in oil production, its highest level since the early 1970s. An increase in output of over 330k b/d in a single week should send a very alarming message to markets about the ability of US producers to continue raising output, even in a context of trying to improve profitability. Considering the lag between production and prices, current levels of output would have been sanctioned when prices were closer to USD 50/b (end of Q3 2017). What the supply response will have been to current prices could be overwhelming.
Across the rest of the report the data was near uniformly negative. Overall stocks increased by nearly 1.9m bbl while large builds in gasoline, diesel and jet all send poor signals about demand conditions in the US. Refinery utilization did turn up but sliding crack spreads (declining refinery margins) will crimp into demand along the oil value chain.
