Turning point: Cushing stock draws signaled bullish trend reversal

Crude inventories in Cushing, Oklahoma declined in early-to-mid May, signaling a bullish trend reversal at the physical delivery point of the NYMEX WTI contract. Two consecutive weekly draws ended a two-month building pattern, which included the largest weekly increases on record and brought storage levels near maximum usable capacity. The rapid build in inventories and subsequent roll off we think is cleanly mirroring the current state of market fundamentals. Mid-to-late April was likely the largest imbalance in fundamentals with the market now trending toward a delicate balance. Rapid reduction in supply and refinery demand showing signs of life both contributed to the drawdown in Cushing inventories, potentially indicative of a turning point for the market with the worst of the imbalance now in the rearview mirror.