Oil Prices Steady, Oil Supplies Fall

  1. Crude oil stocks fall 17% this year
  2. Market environment is bullish
  3. Distillate stocks fall 25% in 2017
  4. Weekly natural gas consumption rose 27%

Al pic 2009_cropped

Sincerely,
Alan Levine, Chairman of Powerhouse
 
 
 

The Matrix

The Energy Information Administration reported U.S. commercial crude oil stocks at 443 million barrels for the week ending December 8, 2017. Supplies had fallen 5.1 million barrels during the week, the fifth consecutive decline in inventories. This continued a decline that had begun at end-March 2017 when supplies had reached 535.5 million barrels.

In all, stocks of crude oil have fallen 92.6 million barrels over this period, a decline of more than 17 per cent. The erosion of crude oil stocks in the United States reflects an expanding export market as well as the effect of significant nonetheless transitory weather effects. Moreover, an agreement between OPEC members and Russia to sustain crude oil production cuts has been taken seriously by the oil community. And Brent crude oil, the global crude oil price benchmark, has experienced production interruptions.

These indicators should be bullish, disrupting availability as they do. But WTI crude oil has not rallied in recent weeks. With some narrow exceptions, crude oil has traded in a $2.25 range since November 6, 2017.

Distillate fuel oil stocks have also been falling. On February 3rd, there were 170.7 million barrels of fuel oil in commercial storage in the United States.  EIA’s most recent data show inventory at 128.1 million barrels. Nonetheless, prices have stabilized and have traded in a ten-cent range since early November.

Long-term support for ULSD can be found at $1.3720.  At writing, nearby ULSD is trading at $1.93. A minimal retracement is at $1.8320 with more powerful support at $1.7415 – a Fibonacci retracement of 38.2 per cent.

Gasoline prices have shown continuing weakness, returning to normal after the bullish impact of H. Harvey. Refinery maintenance is expected to ramp up soon after the new year. And as it does, the conditions for an expanding gasoline crack spread come into play.

 

Stocks: Crude Oil (excluding SPR) 1982 to 2017

 

Supply/Demand Balances

Supply/demand data in the United States for the week ending December 08, 2017 were released by the Energy Information Administration.

Total commercial stocks of petroleum fell 2.6 million barrels during the week ending December 08, 2017.

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

Commercial crude oil supplies in the United States decreased to 443.0 million barrels, a draw of 5.1 million barrels.

Crude oil supplies decreased in three of the five PAD Districts. PAD District 2 (Midwest) crude oil stocks fell 3.3 million barrels, PADD 3 (Gulf Coast) crude stocks declined 0.3 million barrels, and PADD 5 (West Coast) stocks retreated 3.2 million barrels. PADD 1 (East Coast) crude oil stocks rose 1.5 million barrels while PADD 4 (Rockies) stocks were unchanged from the previous report week.

Cushing, Oklahoma inventories decreased 3.4 million barrels from the previous report week to 52.2 million barrels.

Domestic crude oil production increased 73,000 barrels daily to 9.780 million barrels per day from the previous report week.

Crude oil imports averaged 7.363 million barrels per day, a daily increase of 161,000 barrels. Exports fell 272,000 barrels daily to 1.086 million barrels per day.

Refineries used 93.4 per cent of capacity, a decrease of 0.4 percentage points from the previous report week.

Crude oil inputs to refineries decreased 243,000 barrels daily; there were 16.952 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 149,000 barrels daily to 17.279 million barrels daily.

Total petroleum product inventories saw an increase of 2.5 million barrels from the previous report week.

Gasoline stocks rose 5.7 million barrels from the previous report week; total stocks are 226.5 million barrels.

Demand for gasoline increased 195,000 barrels per day to 9.091 million barrels daily.

Total product demand increased 523,000 barrels daily to 20.471 million barrels per day.

Distillate fuel oil supply fell 1.4 million barrels from the previous report week to 128.1 million barrels. National distillate demand was reported at 4.380 million barrels per day during the report week. This was a weekly increase of 643,000 barrels daily.

Propane stocks increased 0.2 million barrels from the previous report week to 74.7 million barrels. Current demand is estimated at 1.388 million barrels per day, an increase of 102,000 barrels daily from the previous report week.

 

Natural Gas

According to the Energy Information Administration:

Working gas in storage was 3,626 Bcf as of Friday, December 8, 2017, according to EIA estimates. This represents a net decrease of 69 Bcf from the previous week. Stocks were 201 Bcf less than last year at this time and 27 Bcf below the five-year average of 3,653 Bcf. At 3,626 Bcf, total working gas is within the five-year historical range.

Total U.S. consumption of natural gas rose by 27% compared with the previous report week, according to data from PointLogic Energy. Natural gas consumed for power generation climbed by 18% week over week. Industrial sector consumption increased by 8% week over week. In the residential and commercial sector, consumption increased by 50% as a cold front moved across the country, and some areas in the southern United States received snowfall.

 

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