Inventory build might be over

--In the weekly report of the Energy Information Administration, US commercial crude stocks posted an unexpected 4.629 million barrel draw for the week ended May 8. Analysts polled by Platts had been projecting a 1.4 million barrel build. The weekly report by the American Petroleum Institute showed a 3.13 million barrel draw. There also was a draw in gasoline stocks, but a rise in distillate stocks, according to the API.

--Platts' Elzbieta Rabalska reported Wednesday that the tighter spread on prompt ICE Brent crude futures and the North Sea swaps structure over recent days has begun to tempt crude out of floating storage. Even at that, it's not a big move: the ICE Brent futures spread has risen to minus $0.78/b from $0.90/b at the end of last week while the key swaps market has moved 5 cts. Yet the less-steep curve is encouraging players to move oil out of floating storage. "At current levels it doesn't make sense to use up any capital on floating storage," a trading source said Wednesday.

--Platts reported that OPEC output in April was a bit more than 28 million b/d, and now OPEC is saying that the world's call for its crude is going to be significantly above that going forward. In its latest monthly report, On OPEC cut its estimate of non-OPEC oil production in 2009 to 50.54 million b/d, 70,000 b/d less than it had previously redicted. This would represent year-on-year growth in non-OPEC supply of 220,000 b/d, 70,000 b/d less than OPEC had estimated in its previous report. With the downward revisions in world oil demand offset by lower non-OPEC supply expectations, OPEC raised slightly the estimated "call" on its own crude in 2009 to 28.81 million b/d, up rom a previous figure of 28.74 million b/d.

--Platts' Sheela Tobben reported that the volume of foreign crude sitting aboard floating storage in the US Gulf has eclined to around 20 million barrels Wednesday, from 30-35 million barrels at the end of April, according to market ources. This follows sales that began last week by holders of that oil under pressure from a narrower NYMEX rude contango, a stronger WTI/Brent and the incentive provided by healthy gasoline margins, they said. "Last count sweet and sour total about 20 million barrels in the USG but seems a little high given many stems moved last week," aid a trader with a major, referring to several sales of Russian Urals last week.

With the world markets seeing tigheter inventories, the most visible sign of it is in the spread among different alendar months delivery of crude. Following the release of the API inventories, the spread between June and July rude had narrowed to 70 cts, with July about that much higher than June. At one point in mid-April, the front month to second month spread was more than $3. That sort of movement only occurs when inventories are being drawn own, and the numbers, and stories from the market, are beginning to confirm that.