Now you see it. Now you don’t. Presto, change-o the U.S. oil glut has disappeared. Low crude prices and a booming global economy have caused the biggest oil glut in history to disappear before your very eyes. The American Petroleum Institute reported another massive 5.121 million barrels drop in U.S. crude supply dragging stockpiles back to the lower end of the average range for this time of year.
The historic drop in U.S. crude supply continues as strong demand, a drop in U.S. imports at a time when our exports are at a record high, and OPEC production cuts show up in the global market. Now with strong data out of China overnight and cold weather across the United States we are seeing the biggest drain ever from peak to valley, as Energy Report readers knew would happen. We are seeing a global oil demand surge and we are seeing more rising geopolitcal risk and an oil market that is showing signs of ignoring technical pullback signals.
Supply also fell again in the Nymex delivery point in Cushing, Okla., as weather-related demand is surging. The API reported a whopping 3.930million barrel drop in that storage point. The API reported a smaller than expected 609,000-barrel increase in distillates as cold weather overtook near record production. Truckers are already feeling the pain of rising diesel prices and at the pump it is going to get worse for them before it gets better. Gas supply did rise by 1,782 million barrels but that will provide little comfort at the gas pump where prices are the highest we have seen in a year at this time of year.
Demand is surging. With the U.S. factory production rising for a fourth straight month in December, according to Bloomberg, capping the strongest quarter since 2010 and underscoring a resurgence in manufacturing that's primed for further advances, Federal Reserve data, released Wednesday, is adding to the oil demand picture. Demand that is far outstripping our ability to ramp up crude production and fill the void of that spent supply.
Now reports that China's economy grew 6.9% in 2017 and 6.8% in the fourth quarter against the prior year-ago period are beating expectations. Analysts polled by Reuters had expected GDP growth at 6.7%, cooling from a 6.8% expansion in the previous quarter. That growth means that China will import a record amount of crude oil in the coming year.
In fact “oil price” reported that China’s state-owned oil and gas CNPC is predicting that crude oil demand in China will jump by 4.6% this year to a record 12 million barrels of oil per day. They see net crude oil imports at 7.7% above 2017 levels, to 451 million metric tons, or about 9.06 million barrels per day. The forecast is based on estimated GDP expansion of 6.7%, slightly down from 6.9% in 2017. Yet, seeing that the GDP came in higher that means that oil import numbers will go back up. China is the world biggest oil importer.