Crude Oil Inventories Challenge Storage Capacity
- Crude oil inventory reached 426 million barrels, a new record by far
- Global demand is flat
- Refinery use has fallen due to turnaround and weather-related shutdowns
- Despite deep cold in the Northeast in recent days, the US has been warm overall
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 American Petroleum Institute issued its regular weekly estimates of inventory on Wednesday, February 18, 2015. API estimated a weekly increase in crude oil stocks of 14.3 million barrels. This was a remarkable number, tempered only with the release of the Energy Information Administration’s weekly increase of 7.7 million barrels. Stockpiles are at the highest ever in EIA weekly data going back to August 1982.
The size of the increase is important, yielding as it does record high levels of crude oil stocks in the United States. More to the point, the gain comes at a time of flat global demand and limitations on exports of domestic production. As Cushing storage nears capacity and with Gulf Coast storage nearly full now, the ingredients for a sharp drop in crude oil prices are forming. Cold weather demand may defer the decline, but it cannot be ignored as a possibility.
Bloomberg reports that “Saudi Arabia, the world’s biggest crude exporter, shipped 5.7 percent less oil overseas last year in a sign the price rout did little to revive demand. Shipments averaged 7.11 million barrels a day, down from an 11-year high of 7.54 million barrels a day in 2013 and the lowest in three years, according to data from the Joint Organizations Data Initiative. December exports were below 7 million barrels, the level needed to balance the Saudi budget. Shipments were below 7 million for most of 2014, the data show.”
Supply/Demand Balances
Supply/demand data in the United States for the week ending February 13, 2015 were released by the Energy Information Administration.
Total commercial stocks of petroleum decreased by 0.8 million net barrels during the week ending February 13, 2015. This decline came despite a huge build in crude oil inventories.
Draws were reported for distillate fuel oil, propane, and other oils. Gasoline, K-jet, and residual fuel oil had small gains.
Crude oil supplies in the United States increased to 425.6 million barrels, a gain of 7.7 million barrels. Stocks have been increasing steadily since late September, 2014 when they stood at 356.6 million barrels. With this much crude oil in stock, no evidence of significant U.S. cuts in production, and a market seemingly indifferent to escalating turmoil in producing nations such as Libya and Iraq, the crude oil outlook remains bearish.
Stocks of crude oil rose in every PAD District except the West Coast. Gulf Coast crude oil supplies rose 2.0 million barrels, increasing regional supply to 210.2 million barrels.
Cushing, Oklahoma inventories continued to build, adding another 3.7 million barrels. This puts Cushing storage at 46.3 million barrels according to the week’s report. Maximum storage capacity is estimated to be 70 million barrels.
Domestic crude oil production rose by 54,000 barrels to 9.280 million barrels daily. This marks a new high in output. Crude oil imports fell to 7.1 million barrels per day, a decrease of 181,000 barrels. Refineries utilized 88.7 per cent of capacity, a decline of 1.3 percentage points.
Crude oil inputs to refineries fell by 122,000 barrels daily; there were 15.4 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 232,000 barrels per day to 15.8 million barrels daily.
Total petroleum product inventories saw a decrease of 0.8 million barrels. Gasoline added 0.5 million barrels to supply. PAD District I had an increase of 1.0 million barrels, PADD II put in another 1.1 million barrels, whereas the Gulf Coast drew down 1.3 million barrels.
Total product demand added a little over 0.7 million barrels daily to 20.39 million barrels daily.
Demand for gasoline rose 500,000 barrels per day. It is at 8.8 million barrels daily.
Distillate fuel oil lost 3.8 million barrels from supply. Stocks are 127.4 million barrels. National demand was reported at 4.25 million barrels per day during the report week. This was a weekly decrease of 50,000 barrels daily.
Propane stocks fell 3.5 million barrels. There are 61.5 million barrels in storage. There were only 26.7 million barrels in stock last year at this time. Current demand is estimated at 1.7 million barrels per day.
Natural Gas
According to EIA: Working gas in storage was 2,157 Bcf as of Friday, February 13, 2015, according to EIA estimates. This represents a net decline of 111 Bcf from the previous week. Stocks were 678 Bcf higher than last year at this time and 58 Bcf above the 5-year average of 2,099 Bcf.
The unremitting cold weather that has burdened New England and the Mid-Atlantic states in recent days is reflected in higher natural gas prices. The two weeks starting February 9, 2015 have seen spot futures rise 41 cents, challenging resistance at $3.
The weather has generated substantial Heating Degree Days. The Climate Prediction Center of NOAA reported that New England generated 65 more HDDs than normal during the week ending February 14th. And the Mid-Atlantic had 37 HDDs more than normal. On the other hand, the nation has been much warmer overall. Cumulatively since July 1, 2014 the nation has experienced 133 fewer HDDs than normal and 262 fewer than last year.
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. 59
Was this memo helpful? We’d like your feedback. Please respond to [email protected] Copyright © 2014 Powerhouse, All rights reserved.
