Global Economy Softening?

  1. OPEC+ tightening production
  2. U.S. crude oil output still rising
  3. Chinese economy shows weakness
  4. Final natural gas storage could be 1.2 mm Bcf as withdrawal season ends

Al pic 2009_cropped

Sincerely, Alan Levine Chairman of Powerhouse
(202) 333-5380
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The Matrix

Oil prices – especially distillate fuel oils – have traded in a very tight range for the past three weeks. Support for higher prices included assertions from OPEC+ (the latest grouping of oil overseas producers) that crude oil output would be limited in 2019. Another bullish factor has been IMO 2020. The International Maritime Organization has mandated use of low sulfur fuels (or scrubbers) in ocean-going vessels by the start of 2020 to reduce the impact of burning sulfur in maritime fuels on the global environment.

Against these bullish considerations, refiners cannot ignore the bearish impact of U.S. production of oils from shale and, derivatively, additional supplies from associated natural gas. These factors should influence availability and price of Liquefied Natural Gas. And LNG is slated to become a significant contributor to U.S. exports.

These fundamental concerns were supplemented by worrisome data on the state of the global economy, especially that of China. Press reports say that February exports by China fell the most in three years. China’s imports also fell for the third month in a row, suggesting the possible onset of a trade recession which could occur despite government intervention. China’s February exports fell 20.7 per cent year-on-year. Expectations had been for a 4.8 per cent decline in February after a surprising 9.1 per cent gain in January. China’s trade surplus for February was $4.12 billion versus expectations of $26.38 billion.  More broadly, some economists are concerned about a global slowdown consistent with a growth forecast slashed by the European Central Bank.

These data caused a sharp decline in the price of crude oil. Nonetheless, significant support held. China’s experience over the next several months will be a significant contributor to the direction of crude oil prices through the balance of 2019.

 

Supply/Demand Balances

Supply/demand data in the United States for the week ending March 1, 2019 were released by the Energy Information Administration.

Total commercial stocks of petroleum decreased 0.4 million barrels during the week ending March 1, 2019.

There were draws in stocks of gasoline, K-Jet fuel, distillates, residual fuels, and propane. There were builds in stocks of fuel ethanol and other oils.

Commercial crude oil supplies in the United States increased 7.1 million barrels from the previous report week to 452.9 million barrels.

Crude oil supplies increased in three of the five PAD Districts. PADD 2 (Midwest) crude oil stocks rose 3.4 million barrels, PADD 3 (Gulf Coast) crude stocks increased 1.6 million barrels, and PADD 5 (West Coast) stocks advanced 3.7 million barrels. PAD District 1 (East Coast) crude oil stocks fell 1.6 million barrels. Crude oil stocks in PADD 4 (Rockies) were unchanged from the previous report week.

Cushing, Oklahoma inventories increased 0.8 million barrels from the previous report week to 47.5 million barrels.

Domestic crude oil production was unchanged from the previous report week at 12.1 million barrels per day.

Crude oil imports averaged 7.001 million barrels per day, a daily increase of 1.084 million barrels per day. Exports fell 556,000 barrels daily to 2.803 million barrels per day.

Refineries used 87.5 per cent of capacity, an increase of 0.4 percentage points from the previous report week.

Crude oil inputs to refineries increased 100,000 barrels daily; there were 15.990 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, rose 89,000 barrels daily to 16.285 million barrels daily.

Total petroleum product inventories fell 7.5 million barrels from the previous report week.

Gasoline stocks decreased 4.2 million barrels from the previous report week; total stocks are 250.7 million barrels.

Demand for gasoline increased 80,000 barrels per day to 9.062 million barrels per day.

Total product demand decreased 980,000 barrels daily to 20.490 million barrels per day.

Distillate fuel oil stocks decreased 2.4 barrels from the previous report week; distillate stocks are at 136.0 million barrels. National distillate demand was reported at 4.145 million barrels per day during the report week. This was a weekly increase of 68,000 barrels daily.

Propane stocks decreased 2.0 million barrels from the previous report week; propane stock are 51.4 million barrels. Current demand is estimated at 1.626 million barrels per day, a decrease of 3,000 barrels daily from the previous report week.

 

Natural Gas

According to the Energy Information Administration:

Net withdrawals from storage totaled 149 Bcf for the week ending March 1, compared with the five-year (2014–18) average net withdrawals of 109 Bcf and last year’s net withdrawals of 60 Bcf during the same week. Working gas stocks totaled 1,390 Bcf, which is 464 Bcf lower than the five-year average and 243 Bcf lower than last year at this time.

The average rate of net withdrawals from storage is 8% lower than the five-year average so far in the withdrawal season (November through March). If the rate of withdrawals from storage matched the five-year average of 7.3 Bcf/d for the remainder of the withdrawal season, total inventories would be 1,172 Bcf on March 31, which is 464 Bcf lower than the five-year average of 1,636 Bcf for that time of year.

 

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