The Commodities Feed: US oil inventories fall

US oil numbers: Oil rallied late Tuesday and the strength has continued this morning, with Brent trading back well above the US$66/bbl mark. This follows the API reporting that US crude oil inventories fell by 7.55MMbbls over the last week, significantly more than the 2.9MMbbls draw the market was expecting. The API also reported that Cushing inventories declined by 1.26MMbbls over the last week. These draws have not only been supportive for the flat price, but have also supported the WTI Aug/Sep time spread.

On the products side, the API reported that distillate fuel oil inventories increased by 155Mbbls over the week, which was broadly in line with expectations. However, gasoline stocks reportedly fell by 3.17MMbbls over the week, which was very different from expectations of stocks remaining largely unchanged over the week. This surprise draw did see US gasoline cracks rally, which was helped further by Reuters reporting that Philadelphia Energy Solutions was looking to shut down its 335Mbbls/d refinery permanently following a fire and explosion last week at the site. The refinery is the largest on the US east coast.

Industrial metals: Industrial metals continued their rally yesterday with trade talks set to restart between the US and China later this week, whilst a weaker dollar has also been supportive. Meanwhile, striking mine workers at Codelco’s Chuquicamata mine were reportedly blocking roads leading to the mine, as well as several other copper mines in the region including Ministro Hales, Radomiro Tomic and El Abra. Strike action has now entered its 12th day.

Looking at nickel, Glencore’s Koniambo nickel plant was evacuated following a leak on 24 June and has caused production to be suspended. Turning to lead, prices found support from unplanned maintenance announced by China’s largest smelter starting from 25 June. Another smelter in the region may also carry out maintenance, which could hit a combined 20kt of lead production.

Finally, trade data released by China Customs for May showed that refined copper imports into the country fell 28% year-on-year (down 15% month-on-month) to 249kt, while year-to-date imports are down 9% YoY to 1.38mt. However, copper concentrate imports were up 16% YoY to total 1.8mt, while YTD imports have risen 17% YoY to total 9.1mt. Aluminium semis exports remained strong and shipments increased 12% YoY to 496kt, while YTD exports are up 10% YoY to total 2.2mt.

China soybean imports: Chinese soybean imports from the US fell for the first time this year, following the re-escalation of the trade war between the US and China. Imports in May totalled 977kt, down from 1.75mt in the previous month, although there were also reports earlier that Chinese buyers have been asking US exporters to delay shipments due to a lack of storage. While concerns about Chinese demand- stemming from the trade war and African Swine Fever- have largely dictated soybean price action over much of the last year, an increasingly important concern is delayed soybean plantings in the US following heavy rainfall over much of the planting period.