Crude Stocks Reach Highest Level Since 1931
The geopolitical situation remains unsettled. Russian intentions in Ukraine are provocative
Refineries are returning to service after maintenance. Facilities are operating at 91 per cent of capacity.
Product demand is slowing. Consumption is lagging last year by 600,000 barrels daily. Distillate fuel oil is bucking the trend, 246,000 barrels daily more demand than last year at this time.
Inventories of natural gas are 850 Bcf, half of what they were last year.
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
Expectations of easing in the Ukrainian situation have proven illusory. Press reports note, “The Ukrainian government Friday brushed off Russian threats of intervention in a tense standoff in eastern Ukraine, declaring that Ukraine’s “anti-terrorist operation” against pro-Russian militiamen occupying government buildings would continue.”
Further sanctions against Russia are being threatened. Russia is the second largest producer of natural gas and the third-largest petroleum producer.
Libya continues to frustrate. Recriminations between rebels in Eastern Libya and the central government have grown. Two export terminals remain closed as the rebels accuse the government of failure to meet the terms of an agreement to end a blockade.
Domestic stocks of crude oil reached 397.7 million barrels, the highest level since 1931 according to EIA data that extends back to 1920.
Supply/Demand Balances
Supply/demand data for the week ending April 18, 2014 were released by the Energy Information Administration.
Total commercial stocks of oil rose 12.0 million barrels. Commercial crude oil supplies rose 3.5 million barrels during the report week. (Stocks in the Strategic Petroleum Reserve fell 500,000 barrels.)
Refinery maintenance appears to be slowing. Utilization rates reached 91 per cent of capacity, an increase of 1.2 percentage point during the week. East Coast facilities operated at 84.8 per cent of capacity, a return to use of 5.4 percentage points during the week.
This was reflected in increases in crude oil runs to stills. US runs rose 367,000 barrels daily to 16 million barrels per day. Almost all of this increase in crude oil inputs occurred on the Gulf Coast.
PADD III crude oil stocks rose 2.4 million barrels. Current crude oil stocks are 209.6 million barrels according to EIA. Inventory gains were large on the East Coast and on the Gulf, reflecting the continuing transfer of crude oil from Cushing, OK.
Cushing OK stocks continued their decline. There are now 26.0 million barrels of crude oil in inventory.
Nationally, crude oil imports fell 475,000 barrels daily to 7.8 million barrels daily. Last week’s very large increase was a combination of delayed arrivals to Houston and more ships than normal importing to the West Coast.
Gasoline stocks fell only 300,000 barrels daily to 210.0 million barrels during the report week.
Modest changes were seen on the East, West and Gulf Coasts. Weekly demand fell 380,000 barrels daily for the week. Over a longer horizon, the average of the past four weeks is 8.8 million barrels per day, 4.6 per cent higher than last year at this time.
Distillate fuel oil supplies rose 0.6 million barrels during the week to 112.5 million barrels.
Supplies in the U.S. lag last year’s levels by 2.8 million barrels. East Coast storage was reduced minimally, now at 32.0 million barrels. Distillate fuel oil demand fell to 3.8 million barrels daily.
Propane inventories added 1.2 million barrels in the U.S. PADD II stocks themselves accounted for almost all of the gain. Propane demand was up slightly at 1.1 million barrels per day.
Natural Gas
According to the EIA: The net injection reported for the week ending April 11 was 24 Bcf, 13 Bcf smaller than the 5-year average net injection of 37 Bcf and 1 Bcf smaller than last year’s net injection of 25 Bcf. Working gas inventories totaled 850 Bcf, 850 Bcf (50.0%) less than last year at this time, 1,010 Bcf (54.3%) below the 5-year (2009-13) average, and 777 Bcf (47.8%) below the 5-year observed minimum.
Following late-winter cold weather, working natural gas in storage ended March at an estimated 826 Bcf, the lowest level in 11 years. EIA now expects a large rebuild over the injection season, with inventories ending October at 3,422 Bcf. This represents a record stock build of nearly 2,600 Bcf. Expectations for lower demand from the electric power sector compared with the past several years, as well as increasing production, should help enable a record-high stock build.
EIA expects total natural gas consumption will average 72.1 Bcf per day (Bcf/d) in 2014, an increase of 0.7 Bcf/d from 2013. Increased residential, commercial, and industrial use offsets declines from the electric power sector, which are related to higher natural gas prices.
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 03 NO. 17
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