Oil Supplies Continue to Grow
1. Crude oil futures have gained 25% from recent lows
2. Crude oil stocks achieve new record
3. Refinery utilization is falling
4. Natural gas price of $3.22 projected for 2017
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
Inventory continues to overwhelm the market and demand is not as robust as one might want. Nonetheless, HO markets are resisting the downside. The low of $0.8487 was set on January 21st. Since then, prices have rallied, adding around fifteen cents to the February futures contract.
Crude oil prices also rallied off their lows, adding more than $8.60 to value in five trading days. And this rally comes at a time when U.S. stocks of crude oil are reaching toward 500 million barrels in commercial tanks, an all-time record and gasoline supplies are approaching records as well.
More bearish news for crude oil can be found in the record of refinery activity. Winter refinery maintenance is now getting underway as crude runs and utilization are falling. This should be pressing on crude oil prices and supporting products. This is, after all, the reason we expect gasoline crack spreads to rally.
As we approach the end of winter, seasonal forces tend to press toward a bottom. Despite a very bearish inventory report, HO prices did not lose ground, nor did WTI crude oil.
Supply/Demand Balances
Supply/demand data in the United States for the week ending January 22, 2016 were released by the Energy Information Administration.
Total commercial stocks of petroleum decreased 1.0 million net barrels during the week ending January 22, 2016.
Builds were reported in stocks of RBOB and residual fuel oil. Draws were reported in stocks of fuel ethanol, K-jet fuel, distillates, propane, and other oils.
Crude oil supplies in the United States increased to 494.9 million barrels, a build of 8.4 million barrels. This is a record amount of crude oil in commercial storage, government data show.
Crude oil supplies increased in three of the five PAD Districts. PADD 3 (Gulf Coast) crude oil stocks increased 7.5 million barrels, PADD 4 (Rockies) crude stock grew 0.2 million barrels, and PADD 5 (West Coast) stock expanded 0.8 million barrels. Crude oil stocks in PADD 1 (East Coast) declined 0.1 million barrels and PADD 2 (Midwest) stocks were unchanged from the previous report week.
Cushing, Oklahoma inventories decreased 0.8 million barrels to 63.4 million barrels.
Domestic crude oil production decreased 14,000 barrels daily to 9.221 million barrels per day.
Crude oil imports averaged 7.609 million barrels per day, a daily decrease of 170,000 barrels.
Refineries used 87.4 per cent of capacity, a decrease of 3.2 percentage points from the previous report week.
Crude oil inputs to refineries decreased 551,000 barrels daily; there were 15.639 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 592,000 barrels to 15.833 million barrels daily.
Total petroleum product inventories saw a decrease of 9.4 million barrels from the previous report week.
Gasoline stocks increased 3.5 million barrels; total stocks are 248.5 million barrels. Demand for gasoline decreased 138,000 barrels per day to 8.941 million barrels daily.
Total product demand increased 1.125 million barrels daily to 21.101 million barrels per day.
Distillate fuel oil supply decreased 4.1 million barrels. National distillate demand was reported at 4.005 million barrels per day during the report week. This was a weekly increase of 326,000 barrels daily.
Propane stocks decreased 6.2 million barrels to 83.7 million barrels. Current demand is estimated at 1.945 million barrels per day, an increase of 563,000 barrels daily from the previous report week.
Natural Gas
According to the EIA withdrawals of natural gas from storage were the largest yet for the 2015-2016 heating season:
Net withdrawals from working gas totaled 211 Bcf [for the week ending January 27, 2016,] exceeding the 5-year (2011-15) average net withdrawal of 170 Bcf by 24%. The withdrawal was almost twice as large as last year’s pull for the same storage week. This marks the fourth consecutive week of triple-digit storage withdrawals in the Lower 48 states. Still, working gas levels remain relatively high, with a surplus of 530 Bcf (21%) compared with last year at this time, and 432 Bcf (16%) higher than the 5-year average.
The results of the report week’s data show that while weather still matters, the effect of large inventories muted the East Coast blizzard’s effect on price. Including the change in spot futures from February to March, natural gas prices experienced a range of only twenty cents during the report week. New highs or lows were not seen for this week.
The growth of demand in the industrial sector is likely to support prices in 2016. EIA forecasts prices to average $2.65 in 2016 and $3.22 in 2017. This was reported in the EIA’s Short-Term Energy Outlook. The STEO also expects the U.S. to be a net exporter by mid-2017. This will be the first time since 1955.
Please join us for our 2016 Annual Energy Market Outlook at WPMA: How Low and for How Long?
New for 2016!
Opportunities in a Low Price Environment
How to Protect Yourself When Prices Rebound
Bonus: New Ways to Buy and Protect Propane Inventory
Please join Elaine Levin and David Thompson from Powerhouse as they discuss the factors that will drive the oil markets in 2016.
Following the presentation there will be time to answer your individual questions during a lively Q&A period.
Wednesday, February 17 from 1:00pm – 2:00pm
The Mirage Hotel, Montego D Room
Las Vegas, NV
Click Here to Reserve Your Spot
Have Questions About Volatile Energy Markets?
Visit Powerhouse at WPMA Booth #1018
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