Oil Prices Still Softer
- Global middle distillate stocks burgeoning
- U.S. product imports grow
- Middle East refining capacity rising
- Four Tcf in sight for end-of-October natural gas storage
Table covers crude oil and principal products. Other products, including residual fuel oil and “other oils” are not shown, and changes in the stocks of these products are reflected in “Total Petroleum Products.”
Statistics Source: Energy Information Administration “Weekly Petroleum Status Report” available at www.eia.doe.gov
The Matrix
Distillate fuel oil continues to be the big story of petroleum supply/demand. Demand in the United States continues to wane. Over the four weeks ending September 25, demand ran 3.8 million barrels daily. This is well under the typical high-four million barrels daily of ten years ago.
Four-week average imports have exceeded 100,000 barrels per day, reflecting the loss of global demand and product looking for a market. China, for example, reportedly exported a record amount of distillates in August as the country wrestles with excess capacity and falling demand.
Saudi Arabia is also adding to global balances, increasing ULSD exports to Europe. Regional refining capacity has grown dramatically in an attempt to keep up with competition from refiners in India, South Korea and Japan.
Despite the large overhang of distillate fuel oil stocks, some analysts remain skeptical of the twenty dollar-handle crude oil thesis being talked about. Especially with the refinery turnaround season now underway, they believe that refined prices will be supported this autumn.
The Energy Information Administration reported that refinery usage fell below ninety per cent during the report week ending September 25, 2015. As recently as August, utilization peaked at 96.1 per cent.
Nonetheless, stocks of crude oil and petroleum products continue to rise. The United States now holds 1.301 billion barrels of supply, a record going back at least to 1990. Price support for HO is at $1.3745.
Supply/Demand Balances
Supply/demand data in the United States for the week ending September 25, 2015 were released by the Energy Information Administration.
Total commercial stocks of petroleum increased 3.7 million net barrels during the week ending September 25, 2015.
Builds were reported in stocks of RBOB, residual fuel oil, and propane. Draws were reported in stocks of fuel ethanol, K-jet fuel, distillates, and other oils.
Crude oil supplies in the United States increased to 457.9 million barrels, a build of 4.0 million barrels.
Crude oil supplies increased in three of the five PAD Districts. PADD 1 (East Coast) stocks grew 0.5 million barrels, PADD 3 (Gulf Coast) stocks increased 5.2 million barrels, and PADD 5 (West Coast) stocks grew 2.2. Crude oil stocks in PADD 2 (Midwest) deceased 3.8 million barrels and PADD 4 (Rockies) stocks fell 0.2 million barrels and PADD.
Cushing, Oklahoma inventories decreased to 53.0 million barrels, a draw of 1.0 million barrels.
Domestic crude oil production decreased 40,000 barrels daily to 9.096 million barrels per day.
Crude oil imports averaged 7.554 million barrels per day, a daily increase of 378,000 barrels.
Refineries used 89.8 per cent of capacity, a decrease of 1.1 percentage points from the previous report week.
Crude oil inputs to refineries decreased 241,000 barrels daily; there were 15.962 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 200,000 barrels to 16.182 million barrels daily.
Total petroleum product inventories saw a decrease of 0.3 million barrels. Gasoline stocks grew 3.3 million barrels; total stocks are 222.0 million barrels.
Total product demand decreased 0.549 million barrels daily to 19.592 million barrels per day.
Demand for gasoline decreased 194,000 barrels per day to 9.021 million barrels daily.
Distillate fuel oil supply decreased 0.3 million barrels. National demand was reported at 3.762 million barrels per day during the report week. This was a weekly decrease of 560,000 barrels daily.
Propane experienced an increase of 1.7 million barrels to supply. There are 98.7 million barrels in storage. According to government data, U.S. propane inventories are at levels not seen in 22 years. Current demand is estimated at 0.792 million barrels per day, a decrease of 452,000 barrels daily from the previous report week.
Natural Gas
According to the EIA:
Net storage injection is larger than the five-year average for the report week. The net injection reported for the week ending September 25 was 98 Bcf, down from 106 Bcf the previous week. This injection compares with the five-year average increase of 94 Bcf for the week and last year’s increase of 110 Bcf. Working gas inventories for the report week totaled 3,538 Bcf, 454 Bcf (15%) higher than last year at this time and 152 Bcf (5%) higher than the five-year (2010-14) average.
Futures trading involves significant risk and is not suitable for everyone. Transactions in securities futures, commodity and index futures and options on future markets carry a high degree of risk. The amount of initial margin is small relative to the value of the futures contract, meaning that transactions are heavily “leveraged”. A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit: this may work against you as well as for you. You may sustain a total loss of initial margin funds and any additional funds deposited with the clearing firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit. Past performance may not be indicative of future results. This is not an offer to invest in any investment program.Vol. PH 04 NO. 39
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