Summertime, and the Storage is Filling

  1. Summer petroleum product demand is strong.
  2. Refining output of petroleum products is even stronger
  3. Growing carry in ULSD futures should encourage more storage.
  4. Natural gas storage grows by less than average.


Elaine Levin, President,
(202) 333-5380


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


The Matrix

The weight of rising inventories is finally pressuring prices, albeit slowly.  EIA statistics released for the week ending July 15 continue the trend of strong product demand, and an even stronger supply response from refiners.  Trading action this week reflects sluggish summer volume.  As summer demand starts to fade, and refineries head into turnaround, could we finally see the bears back in control?

Gross inputs to refineries topped 17 million barrels per day, a level not seen since last summer.  Refiners made more than 10 million b/d of gasoline and 5 million b/d of distillate.  Low prices are keeping drivers on the road.  U.S. gasoline demand remains near record numbers, yet inventories built by almost 1 million barrels.  Distillate demand recovered from last week’s drop, returning to just shy of 4.0 million b/d.

Gasoline inventories are growing overseas too.  Record imports of crude oil early this year by teapot refiners in China has turned into a glut of refined product.  Exports of gasoline from China doubled from last year as refiners look to push excess supply onto the world market.

Another bearish sign is the growing carry in ULSD futures.  The following chart shows the difference between the front and second month HO futures contract going back to the beginning of 2016. September ULSD futures are trading approximately 2.50 cents per gallon over the front month August ULSD futures.  This level is the highest carry between the 1st vs 2nd nearby ULSD futures so far this year.

A strong carry encourages storage owners to fill it.  PADD 1 distillate inventories stand at 61 million barrels, 5 million barrels fewer than the highs last January.   East Coast storage has gained almost 6.0 million barrels over the last 8 weeks.  ULSD basis in New York Harbor, delivery point for the futures contract, is trading at a 3 cent discount to the futures price.  We expect storage to continue to fill.

Supply/Demand Balances

Supply/demand data in the United States for the week ending July 15, 2016 were released by the Energy Information Administration.

Total commercial stocks of petroleum increased 2.6 million net barrels during the week ending July 15, 2016.

Builds were reported in stocks of gasoline, K-jet fuel, residual fuel oil, propane, and other oils. A draw was reported in stocks of distillates. Fuel ethanol stocks were unchanged from the previous report week.

Crude oil supplies in the United States decreased to 519.5 million barrels, a draw of 2.3 million barrels.

Crude oil supplies decreased in two of the five PAD Districts. PAD District 2 (Midwest) crude oil stocks declined 0.1 million barrels and PADD 3 (Gulf Coast) stocks decreased 2.6 million barrels. PADD 1 (East Coast) crude stocks increased 0.3 million barrels, and PADD 5 (West Coast) stocks grew 0.1 million barrels. PAD District 4 (Rockies) was unchanged from the previous report week.

Cushing, Oklahoma inventories increased 0.2 million barrels to 64.1 million barrels.

Domestic crude oil production increased 9,000 barrels daily to 8.494 million barrels per day.

Crude oil imports averaged 8.134 million barrels per day, a daily increase of 293,000 barrels.

Refineries used 93.2 per cent of capacity, an increase of 0.9 percentage points from the previous report week.

Crude oil inputs to refineries increased 319,000 barrels daily; there were 16.863 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, increased 166,000 barrels daily to 17.071 million barrels daily.

Total petroleum product inventories saw an increase of 4.9 million barrels from the previous report week.

Gasoline stocks increased 0.9 million barrels; total stocks are 241.0 million barrels.

Demand for gasoline increased 115,000 barrels per day to 9.785 million barrels daily.

Total product demand increased 1.206 barrels daily to 20.653 million barrels per day.

Distillate fuel oil supply decreased 0.2 million barrels; total stocks are 152.8 million barrels.  National distillate demand was reported at 3.920 million barrels per day during the report week. This was a weekly increase of 713,000 barrels daily.

Propane stocks increased 0.1 million barrels to 87.4 million barrels. Current demand is estimated at 1.145 barrels per day, an increase of 410,000 barrels daily from the previous report week.

Natural Gas

According to the Energy Information Administration:

Working gas rises in Lower 48 states but by less than average. Net injections into storage totaled 34 Bcf, compared with the five-year (2011-15) average net injection of 61 Bcf and last year’s net injections of 70 Bcf during the same week. Working gas stocks total 3,277 Bcf, 559 Bcf above the five-year average and 471 Bcf above last year at this time.


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