Oil Stocks Grow; Global Storage Building
- Record storage highs at Cushing and nationally
- Many factors still press crude oil prices lower
- Product demand counter-seasonally high
- Natural gas stocks remain over five-year maximum
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
A “monster” snow event has overwhelmed the East Coast depositing up to 30 inches on this densely populated area. Post-storm recovery is proceeding smoothly and damage appears to have been minimal. Nonetheless, the weather should affect gasoline consumption bearishly. Any bullish effect on heating oil should be small, since the temperature will not get overly cold. Markets have their own logic and imperatives.
Oil inventories continue to expand. The EIA petroleum balance sheet for the week ending January 15 recorded several new records. Cushing OK stocks of crude oil reached new highs. Total domestic supplies established a record too.
Gasoline stocks, not at a record, nonetheless are now higher than last year. And demand for gasoline is at unseasonably high levels. An expected major snow event in the Northeast can be expected to erode gasoline demand over the next few weeks.
The steady builds in U.S. inventories have put pressure on crude oil prices—and the advance into refinery turnaround season should back up crude oil supplies even more. Refinery usage rate have fallen two percentage points since late in December and are likely to move lower as winter moves on.
The amount of storage available to handle burgeoning stocks has been a concern for traders. Some have pointed out that full storage could lead to a rapid drop in prices to clear the market. But the need for storage has encouraged new ullage globally. This storage is located largely in Asia and the United States. The IEA says the U.S. is able to hold storage of “hundreds of millions” of additional barrels. This could slow the pace of price decline, but ironically, could encourage even more production, despite about three billion barrels already in store and newly available crude oil potential from Iran.
There are also floating storage possibilities in tankers. Wider contango in crude oil prices should increase interest in such storage. Since December, 2015, however, the difference between current and second month WTI has not trended, trading between 80 and 142 cents, current month under.
Supply/Demand Balances
Supply/demand data in the United States for the week ending January 15, 2016 were released by the Energy Information Administration.
Total commercial stocks of petroleum increased 6.6 million net barrels during the week ending January 15, 2016.
Builds were reported in stocks of RBOB, fuel ethanol and K-jet fuel. Draws were reported in stocks of distillates, residual fuel oil, propane, and other oils.
Crude oil supplies in the United States increased to 486.5 million barrels, a build of 4.0 million barrels.
Crude oil supplies increased in three of the five PAD Districts. PADD 3 (Gulf Coast) crude oil stocks increased 5.2 million barrels, PADD 4 (Rockies) crude stock grew 0.3 million barrels, and PADD 5 (West Coast) stock expanded 0.2 million barrels. Crude oil stocks in PADD 1 (East Coast) declined 0.5 million barrels and PADD 2 (Midwest) stocks fell 1.3 million barrels.
Cushing, Oklahoma inventories increased 0.2 million barrels to 64.2 million barrels. This was the fourth consecutive record high at that location.
Domestic crude oil production increased 8,000 barrels daily to 9.235 million barrels per day.
Crude oil imports averaged 7.779 million barrels per day, a daily decrease of 409,000 barrels.
Refineries used 90.6 per cent of capacity, a decrease of 0.6 percentage points from the previous report week.
Crude oil inputs to refineries decreased 233,000 barrels daily; there were 16.190 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, fell 105,000 barrels to 16.425 million barrels daily.
Total petroleum product inventories saw an increase of 2.6 million barrels from the previous report week.
Gasoline stocks increased 4.6 million barrels; total stocks are 245.0 million barrels. Demand for gasoline increased 0.579 million barrels per day to 9.079 million barrels daily.
Total product demand increased 1.436 million barrels daily to 19.976 million barrels per day.
Distillate fuel oil supply decreased 1.0 million barrels. National distillate demand was reported at 3.678 million barrels per day during the report week. This was a weekly increase of 846,000 barrels daily.
Propane stocks decreased 1.9 million barrels to 89.9 million barrels. Current demand is estimated at 1.382 million barrels per day, a decrease of 398,000 barrels daily from the previous report week.
Natural Gas
According to the EIA:
The net withdrawal for the storage week was 178 Bcf, compared with the 168 Bcf net storage withdrawal reported the previous week. This withdrawal compares with the five-year (2011–15) average net withdrawal of 177 Bcf for the week and last year’s withdrawal of 220 Bcf for the same week. The working natural gas inventory for the storage week ending January 15 totaled 3,297 Bcf, which was 629 Bcf (24%) higher than last year at this time and 473 Bcf (17%) higher than the five-year average for this week.
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.
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