US Crude Oil Export Ban Lifted
- First Fed Funds rate boost since 2006
- US crude oil in global markets faces heavy competition
- ULSD stocks continue to expand globally
- Natural gas futures firmly under $2.00
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
The week ending December 18th was one of many changes in the economic environment and some continuing old stories too. The biggest change, perhaps, was the first increase since June, 2006 in the Federal Funds rate to a range of 0.25 per cent to 0.50 per cent. this reflects a healthier economy with five per cent unemployment half of what it was during the 2009 jobs crisis. The Fed also raised its estimate for growth to 2.4 per cent and further reduction in 2016 unemployment to 4.7 per cent.
The shape of domestic petroleum markets will soon change as the ban on U.S. oil exports is lifted. In principle, this should equilibrate U.S. and foreign crude values. As a practical matter, selling domestic oil overseas may not easily be accommodated. Foreign markets are now adequately supplied. New foreign supplies, notably from Iran, will offer substantial competition for market share. And Algeria, generally overlooked by market watchers, is another claimant for a new share. Sonatrach, the national oil company, expects to increase crude oil production by five per cent and will offer new energy exploration rights in 2016.
All principal energy futures markets registered new lows for the down move in effect since last year. At the time of writing, ULSD futures are flirting with $1.10, being drawn inexorably toward round number support at $1.00.
Distillate fuel oil inventories continue to grow. They now stand at 152 million barrels in the United States. Elsewhere, China is pouring distillate fuels onto global markets. Exports of diesel from China are put at 5.3 million metric tons for the first ten months of 2015. This is 49 per cent higher than last year at this time.
The increase reflects dismal demand in the United States. Demand for the four weeks ending December 11th was 3.5 million barrels daily, down 8.2 per cent from last year. The situation in China has been exacerbated by weakness in the manufacturing sector. The purchasing manager’s index has been below 50 for the past four months.
Supply/Demand Balances
Supply/demand data in the United States for the week ending December 11, 2015 were released by the Energy Information Administration.
Total commercial stocks of petroleum increased 5.0 million net barrels during the week ending December 11, 2015.
Builds were reported in stocks of RBOB, fuel ethanol, K-jet fuel, and distillates. Draws were reported in stocks of residual fuel oil, propane, and other oils.
Crude oil supplies in the United States increased to 490.7 million barrels, a build of 4.8 million barrels.
Crude oil supplies increased in two of the five PAD Districts. PADD 3 (Gulf Coast) crude oil stock increased 8.0 million barrels and PADD 4 (Rockies) stocks grew 0.2 million barrels. PADD 1 (East Coast) crude oil stocks experienced a draw of 0.2 million barrels, PADD 2 (Midwest) stocks decreased 1.1 million barrels, and PADD 5 (West Coast) stocks fell 2.0 million barrels.
Cushing, Oklahoma inventories increased 0.7 million barrels to 60.1.
Domestic crude oil production increased 12,000 barrels daily to 9.176 million barrels per day.
Crude oil imports averaged 8.312 million barrels per day, a daily increase of 291,000 barrels.
Refineries used 91.9 per cent of capacity, a decrease of 1.2 percentage points from the previous report week.
Crude oil inputs to refineries decreased 41,000 barrels daily; there were 16.611 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 202,000 barrels to 16.663 million barrels daily.
Total petroleum product inventories saw an increase of 0.2 million barrels from the previous report week. Gasoline stocks increased 1.7 million barrels; total stocks are 219.4 million barrels.
Total product demand decreased 34,000 barrels daily to 20.237 million barrels per day.
Demand for gasoline decreased 200,000 barrels per day to 9.220 million barrels daily.
Distillate fuel oil supply increased 2.6 million barrels. National demand was reported at 3.521 million barrels per day during the report week. This was a weekly increase of 253,000 barrels daily.
Propane stocks decreased 1.7 million barrels to 99.0 million barrels. Current demand is estimated at 1.325 million barrels per day, a decrease of 218,000 barrels daily from the previous report week.
Natural Gas
According to the EIA:
The net withdrawal for the storage week was 34 Bcf compared with the 76 Bcf net storage withdrawal reported the previous week. This withdrawal compares with the five-year (2010–14) average net withdrawal of 120 Bcf for the week and last year’s withdrawal of 61 Bcf for the same week. The working natural gas inventory for the storage week ending December 11 totaled 3,846 Bcf, which was 541 Bcf (16%) higher than last year at this time and 322 Bcf (9%) higher than the five-year average for this week.
Working gas withdrawals are the lowest on record thus far in the 2015-2016 heating season. This week’s 34-Bcf withdrawal marked the third smallest net withdrawal reported in December in the history of the WNGSR. The smallest December net withdrawal on record since 2010 totaled 20 Bcf in December 2011. The smallest net withdrawal ever reported in December totaled 11 Bcf in 2006.Since working gas stocks peaked at 4,009 Bcf on November 20, 2015, working gas stocks have declined 163 Bcf, or 54 Bcf/week, which is significantly below the five-year average of about 88 Bcf/week over the same period.
Natural gas prices are now firmly below $2.00 per mmBtus. Current prices were last seen in February, 1999. There seems to be little bullish news to support prices and Elliott Wave objectives are around $1.10.
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