WTI Crude Oil Price Breaks Resistance

  1. Crude oil price and supply rise
  2. Sixty dollars possible objective
  3. Oil supply glut may be receding
  4. Natural gas starts injection with storage already high

Al pic 2009_cropped

Alan Levine Chairman, Powerhouse



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

Supply data for the week ending April 15, 2016 repeated a by-now familiar story. Crude oil stocks rose in the United States and crude oil prices reached higher. This time, however, the June crude oil futures contract exceeded resistance at $42.45. This opens the way to new resistance at $51, last seen in October, 2015. If that level is exceeded, crude oil prices could seek more extensive resistance established in May and June of 2015 at $59.75.

Sixty dollars is important too, because this is the level where many analysts believe domestic shale oil producers can justify returning to exploration/production. There are, of course, a range of effective break even prices for shale oil, put between $40 and $90 per barrel. This average level may be the best producers can expect over the next year or so as the industry strives to reduce the high levels of inventory now in storage.


EIA now estimates that any surplus in stocks should be fully absorbed by mid-2017. The group estimates that the “pace of inventory builds is expected to slow to an average of 1.4 million b/d in 2016 and to 0.4 million b/d in 2017.”

Some observers think that even now the glut is more an illusion than a reality. In the near-term, problems in Nigeria and Kurdish Iraq have limited new output. The International Energy Agency expects now-faltering shale oil production to cause non-OPEC output to decline by the most since 1992. Moreover, Iranian production does not seem to be growing as rapidly as anticipated because financial sanctions are impeding sales.

Demand has been responding to lower prices, helping to reduce the global supply excess. The gas-thirsty Ford F150 led U.S. vehicle sales last year. And the growing popularity of gasoline powered vehicles in India has contributed to demand as well. IEA expects global gasoline demand to climb 600,000 barrels daily in 2016. In the U.S., DOE projects this year’s demand to match the 2007 record of 9.29 million barrels daily.

Supply/Demand Balances

Supply/demand data in the United States for the week ending April 15, 2016 were released by the Energy Information Administration.

Total commercial stocks of petroleum decreased 0.4 million net barrels during the week ending April 15, 2016.

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

Crude oil supplies in the United States increased to 538.6 million barrels, a build of 2.1 million barrels.


Crude oil supplies increased in two of the five PAD Districts. PAD District 4 (Rockies) crude oil stocks increased 2.0 million barrels and PADD 5 (West Coast) stocks grew 1.0 million barrels. PADD 1 (East Coast) and PADD 2 (Midwest) crude oil stocks both experienced a draw of 0.4 million barrels. PAD District 3 (Gulf Coast) crude oil stocks were unchanged from the previous report week.

Cushing, Oklahoma inventories decreased 0.3 million barrels to 64.3 million barrels.

Domestic crude oil production decreased 24,000 barrels daily to 8.953 million barrels per day.

Crude oil imports averaged 8.187 million barrels per day, a daily increase of 247,000 barrels.

Refineries used 89.4 per cent of capacity, an increase of 0.2 percentage point from the previous report week.

Crude oil inputs to refineries increased 163,000 barrels daily; there were 16.104 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, increased 51,000 barrels to 16.258 million barrels daily.

Total petroleum product inventories saw a decrease of 2.5 million barrels from the previous report week.

Gasoline stocks decreased 0.1 million barrels; total stocks are 239.7 million barrels. Demand for gasoline decreased 189,000 barrels per day to 9.444 million barrels daily.

Total product demand increased 242,000 barrels daily to 20.228 million barrels per day.

Distillate fuel oil supply decreased 3.6 million barrels; total stocks are 159.9 million barrels.  National distillate demand was reported at 4.276 million barrels per day during the report week. This was a weekly increase of 423,000 barrels daily.


Propane stocks increased 1.2 million barrels to 68.9 million barrels. Current demand is estimated at 942,000 barrels per day, an increase of 242,000 barrels daily from the previous report week.

Natural Gas 

According to the EIA:

Working gas in storage was 2,484 Bcf as of Friday, April 15, 2016. This represents a net increase of 7 Bcf from the previous week. Stocks were 881 Bcf higher than last year at this time and 811 Bcf above the five-year average of 1,673 Bcf. At 2,484 Bcf, total working gas is within the five-year historical range.

The big question facing natural gas traders now is where storage will be as withdrawal begins again in November. Last year, withdrawal began with storage reaching a record high of 4.0 Tcf in November, well above previous annual highs. The season just ended with supply of 2.5 Tcf. This was relatively high, reflecting poor demand driven by the warmest winter on record. Natural gas production, too, continued at high rates.

EIA expects a summer build of about 1.6 Tcf this year. This is a relatively small increase, limited by available storage capacity. Capacity is estimated to be anywhere between 44 and 73 per cent of design capacity as the injection period begins.


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.

Powerhouse is a registered affiliate of Coquest, Inc.

We’d like your feedback.
Please respond to [email protected]
or call: 202 333-5380

Copyright © 2016 Powerhouse, All rights reserved.