U.S. Oil Supply Data Bearish, Prices Bullish

  1. Domestic crude oil production sustains 10 million barrels daily
  2. Refinery output falling in February
  3. Crude oil exports over two million barrels per day
  4. Natural gas storage on track to be tight as withdrawal period draws to a close

Al pic 2009_cropped

Sincerely,
Alan Levine, Chairman of Powerhouse
(202) 333-5380
 
 
 

The Matrix

Petroleum consumption in the United States has remained more-or-less steady over the past decade. Product demand in February this year has been running around 20.3 million barrels daily, little changed from its 20.1 million barrel-per-day level a decade ago.

U.S. Product Demand: Avg Daily Product Demand 2008, 2013, 2018 Source: POWERHOUSE research, EIA. 

 

Principal products consumption has changed little over this period.  Markets showed small gains in distillate fuels and propane use and generally flat gasoline demand.

Current data, however, present a bearish picture of U.S. supply data but bullish prices.  In particular, domestic production of crude oil has exceeded ten million barrels daily. Since the beginning of 2018 daily output has expanded nearly five per cent, most recently reported to be 10.3 million barrels daily.

Seasonal factors are at play too. Refinery turnaround has begun. EIA puts refinery utilization at 88.1 per cent of capacity for the week ending February 16. On February 2, 92.5 per cent of capacity was in use. This is reflected in crude oil inputs to refineries, now at 15.8 million barrels daily. During the week ending December 29, 2017 crude oil inputs reached 17.4 million barrels daily.

These data are bullish for petroleum product prices, bearish for crude oil values. Crack spreads appear now to be bottoming and could rally as refinery slowdowns cut into product supplies and back up crude oil.

 

U.S. Crude Exports: Weekly US Exports of Crude Oil 1990 – 2018

 

 

 

 

 

 

 

 

 

 

 

One uncertainty in evaluating the crack spread is the growing importance of U.S. crude oil exports. Crude oil can now be exported freely after several years of export restrictions.  After restrictions were lifted in 2014, exports have risen rapidly, exceeding two million barrels daily in the most recent EIA report.

 

Supply/Demand Balances

Supply/demand data in the United States for the week ending February 16, 2018 were released by the Energy Information Administration.

Total commercial stocks of petroleum fell 7.9 million barrels during the week ending February 16, 2018.

There were draws in stocks of fuel ethanol, K-jet fuels, distillates, propane, and other oils. Builds were reported in stocks of gasoline and residual fuel.

Commercial crude oil supplies in the United States decreased to 420.5 million barrels, a draw of 1.6 million barrels.

Crude oil supplies decreased 0.8 million barrels in PAD District 1 (East Coast) crude oil stocks.  PADD 2 (Midwest) crude stocks fell 2.5 million barrels. PADD 3 (Rockies) increased 1.5 million barrels and PADD 5 (West Coast) stocks rose 0.3 million barrels. PADD 4 (Rockies) stocks were unchanged from the previous report week.

Cushing, Oklahoma inventories decreased 2.7 million barrels from the previous report week to 30.0 million barrels.

Domestic crude oil production decreased 1,000 barrels daily to 10.270 million barrels per day from the previous report week.

Crude oil imports averaged 7.021 million barrels per day, a daily decrease of 867,000 barrels.  Exports rose 722,000 barrels daily to 2.044 million barrels per day.

Refineries used 88.1 per cent of capacity, a decrease of 1.7 percentage points from the previous report week.

Crude oil inputs to refineries decreased 329,000 barrels daily; there were 15.833 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 320,000 barrels daily to 16.312 million barrels daily.

Total petroleum product inventories saw a decrease of 6.3 million barrels from the previous report week.

Gasoline stocks increased 0.3 million barrels from the previous report week; total stocks are 249.3 million barrels.

Demand for gasoline decreased 57,000 barrels per day to 9.002 million barrels daily.

Total product demand increased 171,000 barrels daily to 20.454 million barrels per day.

Distillate fuel oil supply fell 2.4 million barrels from the previous report week to 138.9 million barrels. National distillate demand was reported at 4.224 million barrels per day during the report week. This was a weekly increase of 142,000 barrels daily.

Propane stocks decreased 2.5 million barrels from the previous report week to 43.1 million barrels. Current demand is estimated at 1.651 million barrels per day, an increase of 111,000 barrels daily from the previous report week.

 

Natural Gas

According to the Energy Information Administration:

Working gas net withdrawals are 21 Bcf lower than the five-year average. Net withdrawals from storage totaled 124 Bcf for the week ending February 16, compared with the five-year (2013–17) average net withdrawal of 145 Bcf and last year’s net withdrawals of 92 Bcf during the same week. Working gas stocks totaled 1,760 Bcf, which is 412 Bcf less than the five-year average and 609 Bcf less than last year at this time.

Working gas levels are 343 Bcf above the five-year minimum. If net withdrawals from working gas stocks match the five-year average for the remainder of the withdrawal season, working gas stocks will total 1,290 Bcf by March 31, 2018, which is 24% below the five-year average, and the second lowest end of heating season level reported since 2010. Working gas stocks ended the 2013-14 heating season at 837 Bcf, which is the lowest reported level during the same period.

 

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