Overnight exuberance sparked by lower than expected Cushing build reported by API is fading on the heels of June OPEC headlines of no production limits (and rising Saudi production) heading into DOE inventory data. Crude inventories printed a significantly higher than expected 2.78mm build but Cushing saw a smaller than expected build of 243k. Gaosline surprised with a 536k build (API 1.17m draw) and Distillates saw a smaller than API build of 1.26m barrels.

The biggest news was the biggest plunge in US production since July 2015, and yet inventories still rose suggesting that fundamentally this is and has been as much a demand story as one of supply (even as OPEC countries are happy to offset declining US output).

API:

Crude +1.265m (+750k exp)

Cushing +382k (+1.3m exp.. Genscape +821k)

Gasoline -1.17m

Distillates -2.6m

DOE:

Crude +2.78m (+750k exp)

Cushing +243k (+1.3m exp.. Genscape +821k)

Gasoline +536k

Distillates -1.26m

Overall inventory levels continue to rise...

Production plunged by the most sicne July 2015 (driven by a 16.2% collapse in Alaska production - Lower 48 fell 0.4% Wow)

On the all important topic of gasoline demand, which has been perhaps the biggest bullish driver in recent months, gasoline stocks rose 0.5MM to 241.8MM...

... even as consumption is moving briskly higher, and is now above the 10 year maximum for this time of the year. Is the US suddenly flooded in gasoline?

And perhaps the most important finding: Crude oil imports from Saudi Arabia more than doubled; rising 105% to 1.55m b/d, highest since May 2014, according to the EIA.

Breaking down imports:

Total U.S. imports of crude 7660k b/d vs 7550k PADD 1 950k b/d vs 638k PADD 2 2455k b/d vs 2674k PADD 3 2979k b/d vs 2825k PADD 4 226k b/d vs 347k PADD 5 1050k b/d vs 1067k

Canada imports 2924k b/d vs 3269k

Saudi Arabia 1552k b/d vs 756k

Venezuela 889k b/d vs 658k

Mexico 623k b/d vs 635k

Colombia 410k b/d vs 378k

Ecuador 0k b/d vs 195k

Nigeria 279k b/d vs 282k

Kuwait 166k b/d vs 154k

Iraq 205k b/d vs 393k

Angola 78k b/d vs 305k

Whatever it is that the algos were looking at, the reaction in crude was quick:

Crude prices are slipping (focused on the outsize inventory build) since the plunge in production is driven more by Alaska (down 16.2% Wow) as opposed to Lower 48 (down 0.4% WoW)...