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'Tank Bottoms' Loom At Cushing After Across-The-Board Inventory Draws, Another Huge SPR Drain

Zero Rss
4 weeks 1 day ago
'Tank Bottoms' Loom At Cushing After Across-The-Board Inventory Draws, Another Huge SPR Drain

Oil prices bounced higher overnight after the US and Iran exchanged new strikes despite their purported ceasefire, rekindling uncertainty about an end to the Middle East war.

The latest strikes were the most serious since an April ceasefire, and came despite a series of headlines suggesting talks on a deal were progressing.

"A fresh exchange of strikes between the two countries is testing the fragile ceasefire and forcing a reassessment of the chances of a near-term agreement which can reopen the Strait of Hormuz and dial down the pressure the crisis is putting on the global economy," said AJ Bell investment director Russ Mould.

But then, around 1000ET, Axios reports that U.S. and Iranian negotiators have reached an agreement on a 60-day memorandum of understanding to extend the ceasefire and launch negotiations on Iran's nuclear program.

That sent oil prices reeling lower...

With the geopolitical headlines so dominant, this morning's official US crude inventory and supply data is taking a back seat to Washington and Tehran again (despite some chunky draws reported by API overnight).

API

  • Crude -2.8mm

  • Cushing -2.9mm

  • Gasoline -3.19mm

  • Distillates +1.1mm

DOE

  • Crude -3.33mm (-3.2mm exp)

  • Cushing -2.79mm - biggest draw since Aug 2023

  • Gasoline -2.57mm

  • Distillates -2.11mm

Inventories saw across the board drawdowns with Cushing standing out. Distillate draws returned as gasoline stocks fell for the 15th straight week

Source: Bloomberg

'Tank Bottoms' loom as inventory at Cushing is the lowest for this time of year since 2014...

The Strategic Petroleum Reserve saw another major drawdown (over 9mm barrels)...

Source: Bloomberg

US Crude production ticked higher as rig counts are rising rapidly...

Source: Bloomberg

The market has backed away from believing the Axios report (after a denial from Iranian news) and the big draw is helping WTI recover...

"The bigger picture is that crude is still on course for a second weekly decline, suggesting investors are not yet pricing in a worst-case disruption," Hargreaves Lansdown analyst Matt Britzman said.

"For now, the market looks caught between short-term nerves over renewed hostilities and a lingering hope that both sides still have enough incentive to get energy flows moving," he added.

Investment strategist Ed Yardeni wrote in an overnight note that "oil markets will be in dire straits" if the Strait of Hormuz doesn't open soon. He sketched out looming crisis points that have turned the U.S.-Iran negotiation into the "ultimate game of chicken."

The U.S. blockade of Iranian ports means the country's oil industry is producing too much and storage capacity is quickly filling. Yardeni concludes that Iran has until mid- or late June before storage is maxed out, forcing a sharp cut in production to domestic consumption levels. "The toll on Iran's oil industry and its broader economy is certainly one of President Trump's best negotiating cards," he wrote.

Yardeni further notes that oil inventories in Asia are already approaching minimum levels, meaning the war-driven dearth of oil imports will soon lead to shortages.

Europe faces the same situation, possibly by late June.

Yardeni highlighted International Energy Agency Director Faith Birol's warning that depleted stocks and high usage during the summer travel season could push global oil markets into "the red zone in July or August."

Tyler Durden Thu, 05/28/2026 - 12:09
Tyler Durden

Angels’ season from hell hits new low after Jorge Soler’s pathetic moment

NY Post
4 weeks 1 day ago
At 21-35 and buried at the bottom of the American League standings, the Angels are quickly becoming the perfect example of a franchise going nowhere. “Sell the team” chants have echoed throughout Angel Stadium in recent weeks as frustration with owner Arte Moreno continues to boil over. Angels’ Season From Hell Hits New Low After...
Ryan Anderson

Bank Of Canada Warns Markets More Vulnerable To Sharp Correction Due To AI Concentration, Basis Trades

Zero Rss
4 weeks 1 day ago
Bank Of Canada Warns Markets More Vulnerable To Sharp Correction Due To AI Concentration, Basis Trades

The Bank of Canada said the global financial system has functioned (surprisingly) well through recent global shocks, but underscored the risk of a sharp asset price correction as well as vulnerabilities related to the role hedge funds are playing in debt markets.

The central bank’s 2026 financial stability report released Thursday noted financial asset valuations have continued to rise, while the stock market is increasingly concentrated in a handful of large tech companies that are heavily invested in artificial intelligence. That makes asset managers more vulnerable to a sudden correction, and a negative shock to AI sectors would have an outsized impact on broader stock indexes.

The central bank also reminded markets that the risk of basis trades remains front and center, warning that the increased role of hedge funds in overnight funding markets poses a vulnerability to the overall financial system, Bloomberg reported.

“A sharp pullback in hedge fund activity in government debt markets, for example, could negatively affect the liquidity and functioning of these markets and other fixed income markets. This, in turn, could generate financial system stress,” the report said.

While senior Deputy Governor Carolyn Rogers said individually, these vulnerabilities look “manageable", he added that “the economic and geopolitical environment has become more volatile. And this has made it more likely that a new shock or a combination of shocks could cause several vulnerabilities to crystallize at once."

The report analyzes risks to the Canadian financial system, but doesn’t assign probability and isn’t a projection from the central bank.

Meanwhile for households and businesses, the bank said the main financial health vulnerability relates to a geopolitical or economic shock that leads to a deep recession and a spike in unemployment. While the central bank previously flagged mortgage renewals as a concern, it noted on Thursday that most borrowers have managed this risk well.

“With the final wave of these renewals set to happen over the next 12 months, we expect this risk to have fully passed by the second half of 2027,” Deputy Governor Toni Gravelle said.

While the ratio of household debt to disposable income has increased slightly over the past year, the central bank noted households appear better off when wealth is taken to account.

It attributes that improvement to higher home prices over time, but noted the recent increase in net worth has been driven by gains in financial markets as the housing market softened.

As for Canada’s big banks, the report says they have become more resilient over the past year amid higher profitability and healthy capital buffers.

“They have also set aside additional funds to absorb potential loan losses. This positions them to support the economy and financial system, even in a severe downturn,” Gravelle said.

The report cautioned that in the stress‑test scenario, as unemployment rises and housing prices fall, households and businesses come under significant stress. Rates of mortgage arrears increase and reach a multi‑decade high. Businesses face increased costs and a decline in demand, which pushes corporate default rates close to levels seen during the global financial crisis.

Meanwhile, the aggressive use of repo markets has further increased their importance in Canada’s financial system. More than $130 billion in repo transactions now take place in Canada each day, about double the amount from five years ago. A wide range of market participants use repos to obtain leverage, borrow and lend securities, earn returns on extra cash and manage funding liquidity.

The report cautioned that repo activity is rising in part because more Government of Canada bonds are being issued and traded.

Repos are a flexible and cost‑effective way to finance trading in government bonds and therefore play an important role in facilitating dealers’ market‑making activities. They also allow hedge funds to finance their activities, including basis trades in government bonds and futures. These activities, in turn, support liquidity and efficiency in the markets for government securities.

Government bonds are widely used as collateral and liquid assets to manage risks. They are also used as pricing benchmarks for other securities. Because of this, a disruption in repo markets would have broad implications for the financial system. These include:

  • A sudden deleveraging by asset managers. For example, if hedge funds or other asset managers cannot obtain repo funding, they may need to quickly sell government bonds, further reducing market liquidity.
  • A reduction in overall market liquidity. Wider bid‑ask spreads and higher trading costs in government bond markets could spill over into other fixed‑income and derivative markets. If this led to significant margin calls, it could result in a liquidity spiral as market participants are forced to sell liquid assets to raise cash.
  • Sharp movements in the Canadian Overnight Repo Rate Average (CORRA). This would affect the large numbers of financial instruments that use CORRA as a risk‑free rate, such as interest rate derivatives and floating rate notes.

The report concludes that if any of these situations were to occur, "borrowing costs across the economy would go up, leading to potential second‑round effects."

Tyler Durden Thu, 05/28/2026 - 12:00
Tyler Durden

Bessent Warns Oman On Hormuz Toll Scheme, After Trump Threatened To 'Blow Up' US Ally

Zero Rss
4 weeks 1 day ago
Bessent Warns Oman On Hormuz Toll Scheme, After Trump Threatened To 'Blow Up' US Ally

On an official level at least, Oman remains a close strategic partner and key ally of the United States in the Middle East; however, that relationship has been severely strained this month amid apparent Iranian-Omani cooperation regarding a potential toll system for the Strait of Hormuz. This of course flies in the face of the US posture in the region.

US Treasury Secretary Scott Bessent is the latest top Trump admin official to chastize Oman: "The United States Government will not tolerate any effort to impose a tolling system in the Strait of Hormuz," he said on X Thursday.

"Oman, in particular, should know that the U.S. Treasury will aggressively target any actors involved - directly or indirectly - in facilitating tolls for the Strait and any willing partners will be penalized," Bessent continued. "All nations should reject outright any efforts by Iran to disrupt the free flow of commerce. Tehran’s days of terrorizing the region and the world are over."

Sky News/Getty Images

Starting a week ago, official 'discussions' between Oman and Iran were widely reported:

Iran and Oman have discussed setting up a toll system to charge vessels transiting through the Strait of Hormuz, despite President Trump’s condemnation of charging fees to pass through the waterway.

“Iran and Oman must mobilize all their resources both to provide security services and to manage navigation in the most appropriate manner,” Iranian Ambassador to France Mohammad Amin-Nejad on Wednesday told Bloomberg News, which first reported the talks.

Given the country's geography, in the southeastern Arabian Peninsula, it is likely to play a key role in any final agreement or outcome, in terms of opening Hormuz back up to international maritime transit.

Bessent is continuing the pressure campaign soon on the heels of President Trump in somewhat shocking and surprise remarks saying that Oman could come under American military attack if it doesn't cooperate.

Trump said in the Oval and in front of cameras that the US would "blow up" Oman if it doesn’t "behave". The serious threat was issued in response to a reporter's question on whether the US would accept a short-term deal that involved Iran and Oman jointly controlling the Strait of Hormuz.

"No, the strait’s got to be opened to everybody, it’s international waters. Nobody’s going to control it. We'll watch over it, but nobody’s going to control it. That’s part of the negotiation," Trump told reporters during a cabinet meeting.

"Oman will behave just like everybody else, or we’ll have to blow them up. They understand that they’ll be fine," the president then emphasized.

President Trump threatens to attack Oman if they don't "behave."

"Oman will behave just like everybody else or else we'll have to blow em up." pic.twitter.com/Eae4h8BcmP

— The American Conservative (@amconmag) May 27, 2026

Iranian Foreign Ministry spokesman Esmail Baghaei sought to explain earlier this week: "There is no toll. We need to pay attention to the words we use. We’re not after money. Iran and Oman need to create protocols for the safe passage of ships, and this will be based on international laws."

But then came the catch: "It’s only natural that the services we provide, like navigation and the preservation of the ecosystem of the Strait, the Persian Gulf and the Sea of Oman will have costs. These should not be considered tolls. Iran and Oman are being responsible in our efforts and I hope we will reach a conclusion soon," the spokesman said.

Tyler Durden Thu, 05/28/2026 - 11:40
Tyler Durden

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