The WTIC oil future took a hit this morning after an unexpected build in the US crude inventories.
De market expected a drawdown of 1.4 mio barrels but there was a build in crude stocks of 2.9 mio barrels.
But if one look to distillate stocks, we see that they are just on growing, far above the average.
One of the main consumers of distillate products is the US industry. Not so good.
We know that one barrel of oil produces gasoline and other distillates. Gasoline is traditionally the product that is maximized.
From the FT:
But that dynamic began to change over the last few years leading to some expensive refinery adjustments for the purpose of producing more distillates.
Which brings us to today. Refineries have no doubt been switching back to their old gasoline-max settings, and yet there appears to be no slowdown in distillate overproduction. This is troubling because the greatest danger for the price of oil is the appearance of a massive mismatch in the distillate/gasoline demand picture. It skews the overall price scenario for crude. While a lot of the excess distillate can be exported out, a global industrial slowdown creates the risk that exports might not be a sustainable solution for long.
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