The Peace Dividend Is Dead, Inventory Reality Is Back And Biofuels Follow Energy Higher
Monday's market action delivered a clear message: traders are increasingly rejecting the peace dividend narrative. Despite continuing headlines around diplomacy, crude oil rallied sharply with WTI closing above $92/bbl while soybean oil remained resilient and D4 RINs continued their advance. The reason is becoming increasingly obvious. Inventories continue moving lower almost everywhere. U.S. commercial crude inventories have fallen from roughly 465 million barrels in April to near 435 million barrels today. Global onshore inventories continue tracking below historical averages. U.S. drilled-but-uncompleted wells have fallen to just 4,972, the lowest level recorded under the current methodology, while Permian DUC inventories have dropped 36% year-on-year to only 793 wells. The industry continues drawing inventories rather than building future production capacity. At the same time, the Strategic Petroleum Reserve is now within days of falling to its lowest level since August 1983, a level not seen since the early years of the reserve's creation. We are in week 22... 8 weeks to zero hour.
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