Something For the Bulls, Something For the Bears

1. Refineries returning to service from turn-around
2. U.S. crude oil production remains over nine million barrels daily
3. Heating degree days lagging normal by 23 per cent
4. Natural gas storage nears four Tcf

 

Al pic 2009_cropped

Sincerely,
Alan Levine Chairman, Powerhouse
 
2015-11-02_15-30-31
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

An EIA inventory report for the week ending October 23rd contained significant data for both price bulls and bears. Domestic crude oil production remained over nine million barrels per day. Refineries appear to be returning to service with crude oil runs challenging 16 million barrels daily. Nonetheless, crude oil stocks continue to expand despite lowering imports. This was the sixth consecutive weekly increase in crude oil supplies.

Global distillate fuel oil surpluses have been claiming much of analysts’ attention in recent weeks despite consistent declines in U.S. inventories. Over the past six weeks, domestic distillate fuel oil inventories have fallen nearly twelve million barrels, now at 142 million barrels. Stocks remain relatively high, however, compared with the two previous years.

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The concern is really an Atlantic Basin issue, with storage near historically high levels and unimpressive demand growth at play. In addition, the Basin is absorbing imports from expanded refinery capacity in the Middle East and from China.

Regional tank tops do not seem to be at issue yet but currently slow-developing Heating Degree Days could pose a challenge to storage and to price. One analyst notes that “it would take 50 fewer HDDs than normal in Europe to fill storage.”

Weather is always a winter concern. No less so this year. In fact, NOAA, the National Oceanic and Atmospheric Administration, states that, “an already present El Niño, which has been responsible for the above average hurricane season in the Pacific, is expected to continue and strengthen to record proportions through the winter months.”

The Climate Prediction Center of NOAA records Heating Degree Days in the United States. For the climatological year beginning July 1 through October 24th the United States has experienced 213 HDDs. This is 23 per cent fewer than normal and 13 per cent under last year at this time.

 

Supply/Demand Balances

Supply/demand data in the United States for the week ending October 23, 2015 were released by the Energy Information Administration.

Total commercial stocks of petroleum decreased 3.7 million net barrels during the week ending October 23, 2015.

Draws were reported in stocks of RBOB, fuel ethanol, K-jet fuel, distillates, and other oils. A build was reported in stocks of residual fuel oil while propane stocks were unchanged from the previous report week.

Crude oil supplies in the United States increased to 480.0 million barrels, a build of 3.4 million barrels.

Crude oil supplies increased in four of the five PAD Districts. PADD 2 (Midwest) crude oil stocks increased 0.6 million barrels, PADD 3 (Gulf Coast) stocks added 3.4 million barrels, PADD 4 (Rockies) experienced a build of 0.4 million barrels, and PADD 5 (West Coast) stocks increased 1.4 million barrels. PAD District 1 (East Coast) stocks decreased 2.3 million barrels.

Cushing, Oklahoma inventories declined 0.8 million barrels to 53.3.

Domestic crude oil production increased 16,000 barrels to 9.112 million barrels per day.

Crude oil imports averaged 7.032 million barrels per day, a daily decrease of 439,000 barrels.
Refineries used 87.6 per cent of capacity, an increase of 1.2 percentage points from the previous report week.

Crude oil inputs to refineries increased 271,000 barrels daily; there were 15.616 million barrels per day of crude oil run to facilities. Gross inputs, which include blending stocks, rose 229,000 barrels to 15.826 million barrels daily.

Total petroleum product inventories saw a decrease of 7.1 million barrels. Gasoline stocks decreased 1.1 million barrels; total stocks are 218.6 million barrels.

Total product demand increased 826,000 barrels daily to 20.303 million barrels per day.

Demand for gasoline increased 186,000 barrels per day to 9.343 million barrels daily.

Distillate fuel oil supply decreased 3.0 million barrels. National demand was reported at 4.261 million barrels per day during the report week. This was a weekly increase of 442,000 barrels daily.

Propane stocks remained at 101.6 million barrels. Current demand is estimated at 1.023 million barrels per day, a decrease of 91,000 barrels daily from the previous report week.

 

Natural Gas

According to the EIA:

Working gas stocks are near their highest levels since 2012. Despite the below-average weekly inventory build, working gas climbed closer to the all-time record high of 3,929 Bcf reported for the week ending November 2, 2012. Injections over the next two weeks will need to exceed the five-year (2010-14) average in order to reach this record level. At this point in 2012, working gas stocks totaled 3,908 Bcf. Working gas stocks in the Producing region are well above the record level of 1,297 Bcf reported for this region in November 2013.

Net storage injection is lower than both the five-year average and last year’s builds. The net injection reported for the week ending October 23 was 63 Bcf, down from 81 Bcf the previous week. This injection compares with the five-year average increase of 73 Bcf for the week and last year’s increase of 88 Bcf. Working gas inventories for the report week were 409 Bcf (12%) higher than last year at this time and 153 Bcf (4%) higher than the five-year (2010-14) average.

The negative effect on demand of lagging HDDs is impacting natural gas. NOAA reports that warmer weather, when states’ HDDs are weighted by Gas Home Heating Customers, has generated 345 HDDs, 29 per cent fewer than normal. The East Coast lags normal by about 20 per cent.

 

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