Diesel Prices Break Higher
- ULSD price exceeds $2.00
- U.S. product demand nears 21.8 million barrels daily
- U.S. product exports reach five million barrels per day
- Natural gas in storage was 3.4 Tcf, equal to 5-year average.
The Matrix
It had to happen sooner or later. Futures prices of ULSD have exited the range in which they’ve traded for the past four months. WTI crude oil has developed a definite upward trend. WTI’s trend supports diesel’s upthrust.
The breakout is particularly interesting. Prices are retracing levels not seen since September 16th when markets reacted to an external attack on production facilities in Saudi Arabia. Futures ULSD prices failed $2.10 and WTI spiked to $61.80.
Oil analysts noted that the attack was a reminder of how vulnerable was the global oil distribution system. The success of the United States shale oil production has been enough to calm concerns that the loss of OPEC oil carried significant price implications.
The September spike was impressive but short-lived. ULSD futures started to fall almost immediately and started to trade in a fifteen cent range, now breached. Open interest has risen in recent weeks, supporting the rally.
Distillate Fuel Oil Stocks 2015 – 2019 source: EIA, POWERHOUSE
Markets have offered hints of higher prices for many months. In December, U.S. product demand approached a new record, moving toward 21.1 million barrels daily. And ULSD inventories were tightening. (Weekly Energy Market Situation, December 2, 2019.)
Another bullish indicator has appeared. The United States has become a net exporter of petroleum. (Weekly Energy Markets Situation, December 9, 2019.) In September 2019, exports of all oils exceeded imports by 89,000 barrels daily, marking the first time since monthly record-keeping began in 1973 that the U.S. was a net exporter.
Further bullish price information was related to China, where refinery demand showed expansion. China recorded using 12.9 million barrels daily in the first ten months of 2019. Refiners grew their use of crude oil 6.4 percent year on year.
Positive price news led to an upside break on December 16, 2019. The next price objective should be the high seen in September when the attack on Saudi Arabian facilities occurred.
Supply/Demand Balances
Supply/demand data in the United States for the week ending Dec. 13, 2019, were released by the Energy Information Administration.
Total commercial stocks of petroleum fell by 0.9 million barrels during the week ending Dec. 13, 2019.
Commercial crude oil supplies in the United States decreased by 1.1 million barrels from the previous report week to 446.8 million barrels.
Crude oil inventory changes by PAD District:
PADD 1: Plus 1.0 million barrels to 11.1 million barrels
PADD 2: Plus 0.9 million barrels to 127.4 million barrels
PADD 3: Down 3.0 million barrels to 232.3 million barrels
PADD 4: Plus 0.1 million barrels to 24.1 million barrels
PADD 5: UNCH from the previous report week at 52.0 million barrels
Cushing, Oklahoma inventories fell 0.2 million barrels from the previous report week to 40.2 million barrels.
Domestic crude oil production was unchanged from the previous report week at 12.8 million barrels daily.
Crude oil imports averaged 6.579 million barrels per day, a daily decrease of 308,000 barrels. Exports rose 233,000 barrels daily to 3.633 million barrels per day.
Refineries used 90.6 percent of capacity, unchanged from the previous report week.
Crude oil inputs to refineries decreased 35,000 barrels daily; there were 16.562 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 7,000 barrels daily to reach 17.033 million barrels daily.
Total petroleum product inventories rose 0.2 million barrels from the previous report week.
Gasoline stocks increased 2.5 million barrels daily from the previous report week; total stocks are 237.3 million barrels.
Demand for gasoline rose 529,000 barrels per day to 9.411 million barrels per day.
Total product demand increased 3.439 million barrels daily to 21.798 million barrels per day
Distillate fuel oil stocks increased 1.5 million barrels from the previous report week; distillate stocks are at 125.1 million barrels. EIA reported national distillate demand at 4.120 million barrels per day during the report week, an increase of 389,000 barrels daily.
Propane stocks decreased 2.5 million barrels from the previous report week; propane stocks are 91.0 million barrels. The report estimated current demand at 1.674 million barrels per day, an increase of 918,000 barrels daily from the previous report week.
Natural Gas
More immediately the Energy Information Administration notes:
The net withdrawal from storage totaled 107 Bcf for the week ending December 13, compared with the five-year (2014–18) average net withdrawal of 112 Bcf and last year’s net withdrawal of 132 Bcf during the same week. Working natural gas stocks totaled 3,411 Bcf, which is 9 Bcf lower than the five-year average and 618 Bcf more than last year at this time.
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