An Update on WTI Oil Prices and Inventory Dynamics

By: Tripp Salem

April 20, 2020 was an historic day whereby futures for U.S. crude plummeted to the point of going negative for the first time ever, revealing the extent to which the coronavirus pandemic has obliterated demand for oil. This unprecedented chain of events threatens to overwhelm domestic storage capacity, and has already led to production shut-ins. According to the North Dakota Industrial Commission, 4,600 wells in the state have stopped producing since the beginning of March, equating to roughly 260,000 bbl/d of production. Additional shut-ins are widely anticipated and are certainly not limited to North Dakota.

According to the Energy Information Administration, inventory increased significantly last week, with further builds anticipated. For the week ended April 10th , US commercial crude oil stocks increased by 19.2 MMbbl, with Cush accounting for 5.8 MMbbl of the build and PADD 3 comprising another 10.3 MMbbl. Total gasoline stocks were up 4.9 MMbbl, of which blending components made up 3.9 MMbbl. Distillate inventories bulged 6.3 MMbbl as demand dropped by over 1 MMbbl/d week-on-week. Overall, total US commercial petroleum stocks were up 27.2 MMbbl/d compared to the prior reported week.