Near-Record Supply/Demand Data Released
- Crude oil inventories highest in 80 years
- Four-week average oil demand up 3.5 per cent
- Retail gasoline prices rise for six consecutive weeks
- Natural gas stocks are 6.2 per cent higher than last year
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
Petroleum markets remain in a tight trading range as May comes to an end. Crude oil has traded between $56.50 and $62.58 since mid-April. Trading in a range is at odds with the supply/demand situation reported by the Energy Information Administration. The report for the week ending May 22nd, for instance, is replete with record and near-record domestic crude oil production and inventory numbers which are bearish for price.
The same report shows high gross inputs to refining, bullish for crude oil, bearish for products. Gasoline demand was very substantial as well.
Propane is a good example of the growth in availability. Inventories are now at 73.2 million barrels, 74 per cent higher than last year at this time. Canadian supplies are not included in this figure, but it is clear that stocks are superabundant to the North as well. A negative price has been recorded at Edmonton, Alberta. On May 19th, prices were cited as negative, a record low. The Canadian National Energy Board reported seasonally record high western Canadian propane supplies of 4.36 million barrels going into May.
An unusually strong rally moved prices from the bottom of the range towards the top on Friday. No obvious explanation was available, and prices did not break out to new levels. A move over $2.0975 is needed to break RBOB resistance. The comparable number for ULSD is $2.0575.
Supply/Demand Balances
Supply/demand data in the United States for the week ending May 22, 2015 were released by the Energy Information Administration.
Total commercial stocks of petroleum increased 2.2 million net barrels during the week ending May 22, 2015.
Builds were reported in stocks of distillate fuel oil, K-jet fuel, residual fuel, propane, and other oils. Declines were experienced in stocks of RBOB and fuel ethanol.
Crude oil supplies in the United States decreased to 479.4 million barrels, a draw of 2.8 million barrels from storage. This was the 4th consecutive decline in stocks of crude oil this year.
Crude oil supplies decreased in three of the five PAD Districts. PADD 1 (East Coast) stocks declined 1.9 million barrels. PADD 3 (Gulf Coast) crude oil stocks declined 1.0 million barrels. West Coast crude oil stocks (PADD 5) fell 0.7 million barrels. PADD 2 (Midwest) crude oil stocks experienced a build of 0.9 million barrels and PADD 3 (Gulf Coast) stocks increased 0.8 million barrels.
Cushing, Oklahoma inventories fell to 60.0 million barrels, a decrease of 0.4 million barrels.
Domestic crude oil production increased 304,000 barrels daily to 9.566 million barrels. This increase in production came from both Alaska and the lower 48.
Crude oil imports averaged 6.696 million barrels per day, a daily decrease of 503,000 barrels.
Refineries used 93.6 per cent of capacity, an increase of 1.2 percentage points from the previous week.
Crude oil inputs to refineries rose 237,000 barrels daily; there were 16.450 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, increased 204,000 barrels per day to 16.726 million barrels daily.
Total petroleum product inventories saw an increase of 5.0 million barrels. Gasoline stocks declined 3.3 million barrels.
Total product demand declined 0.255 million barrels daily to 19.980 million barrels per day.
Demand for gasoline rose 473,000 barrels per day to 9.734 million barrels daily.
Distillate fuel oil supply gained 1.1 million barrels. Stocks are 128.8 million barrels. National demand was reported at 3.955 million barrels per day during the report week. This was a weekly decrease of 206,000 barrels daily.
Propane added 2.2 million barrels to supply. There are 73.2 million barrels in storage. Current demand is estimated at 0.984 million barrels per day, an increase of 121,000 barrels daily from the previous report week.
Natural Gas
According to EIA: The net injection reported for the week ending May 22 was 112 Bcf, up from 92 Bcf the previous week. This compares with the five-year average net increase of 95 Bcf for that week and last year’s net increase of 113 Bcf. Working gas inventories for the storage week totaled 2,101 Bcf, 737 Bcf (54.0%) higher than last year at this time and 18 Bcf (0.8%) lower than the five-year (2010-14) average.
There are currently 23 more weeks in the injection season… EIA forecasts that the end-of-October working natural gas inventory level will be 3,890 Bcf, which, as of May 22, would require an average injection of 78 Bcf per week through the end of October.
Both production and demand slowed during the report week according to EIA. Output fell 0.6 per cent, reflecting outages for maintenance in the Northeast. Nonetheless, production was 5.9 per cent higher than last year at this time. U.S. demand fell across all sectors by 4.3 per cent for the week. Consumption remains a little higher than it was last year.
Prices continue to dive. Spot futures reached $3.105 on May 19th. They have moved steadily lower, reaching $2.633 on May 29th. A retest of the $3.443 April 27th low is likely. Further lows are found at $2.16 and $1.902.
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 04 NO. 21
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