Weekly Energy Market Situation, Sept. 8, 2014

Disappointing Jobs Report Push Oil Prices Lower

An increase of 142,000 in payrolls fell short of expectations.
Unemployment data were not consistent with other economic data showing a recocvery underway.
Exports of petroleum products are still growing, moving to 3.7 million barrels daily through June, 2014.
Natural gas in storage lags the low end of the five year range.

Sincerely,

Alan Levine
Chairman, Powerhouse

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 prices moved generally lower through the Labor-Day-shortened week. In part this was attributed to anxieties surrounding the situation in Ukraine. Another bearish element was positive but disappointing data on employment.

According to Bloomberg News, 142,000 advance in payrolls was the smallest this year and followed a revised 212,000 gain in July. The reading was lower than the most pessimistic estimate in a Bloomberg survey of economists. The unemployment rate fell to 6.1 percent last month from 6.2 percent, reflecting a drop in joblessness among teenagers as well as the decline in labor participation.
The slowdown in hiring is at odds with other data — from manufacturing to auto sales to construction — that show an economy gathering pace. For Chair Janet Yellen and her Fed colleagues, the report also did little to clarify the degree of slack in the job market as the labor force participation rate fell and wage growth remained limited, while the ranks of the long-term unemployed declined.

Supply/Demand Balances

Supply/demand data in the United States for the week ending August 29, 2014 were released by the Energy Information Administration.

Total commercial stocks of petroleum rose, adding 1.5 million net barrels last week. Increases were reported in supplies of propane (+1.4 million barrels) and other oils (+2.1million barrels.) Gasoline inventories fell 2.3 million barrels. Total supplies of crude oil and products stand at 1.124 billion barrels of oil. Current supply of all oils has moved ahead of last year by 3.2 million barrels.

Commercial crude oil stocks were 359.6 million barrels during the report week. Stocks are now 0.6 million barrels lower than last year at this time. The high intensity of refinery demand for crude oil continues, as facilities continue to run at 90-plus per cent of capacity.

Crude oil declines during the report week accounted for 0.9 million barrels. The draw in crude oil continues the reduction of supplies that began in early May when crude oil stocks were at 397.6 million barrels.
Most of the decline in crude oil stocks occurred on the West Coast where stocks fell 1.7 million barrels. Gulf Coast inventories added 0.7 million barrels. Stocks at Cushing, OK were reduced by 0.4 million barrels, moving to 20.3 million barrels.

Crude oil imports were unchanged at 7.7 million barrels daily during the report week. Imports are down 5.8 per cent from the same four-week period last year.

U.S. crude oil production held 8.6 million barrels a day according to the latest report.

Refinery utilization rates were 93.3 percent. Utilization eased back 0.2 percentage points nationally, but East Coast facilities operated at 82.2 per cent of capacity—a decline of almost five percentage points.

Crude oil inputs to refineries fell marginally, running at 16.4 million barrels per day during the report week. Gulf Coast facilities ran 8.6 million barrels of crude oil daily at that time.

Gasoline production increased to 9.572 million barrels per day. There was a gain in demand to 9.5 million barrels per day. This was reportedly the highest level since July, 2010. Nonetheless, gasoline demand is likely to fall as the weather turns to autumn.

There was a loss in gasoline stocks of 2.3 million barrels to 210.0 million barrels. A decline of 1.8 million barrels was seen on the Gulf Coast.

Distillate fuel oil supplies built 0.6 million barrels during the report week. The gains were seen in the Midwest and on the West Coast. Supplies in the U.S. remain well below last year’s levels. Distillate stocks continue to lag last year’s level by 6.2 million barrels.

Distillate fuel oil demand rose to 3.9 million barrels daily. Refinery production of distillate fuels remained at 5.1 million barrels daily.

Propane inventories added another 1.4 million barrels in the U.S. Total stocks are 76.1 million barrels, 11.5 million barrels more than last year at this time. Gulf Coast stocks are 41.6 million barrels, up 0.6 million barrels for the week. Midwest stocks were up 0.5 million barrels.

U.S. exports of petroleum products, primarily from the Gulf Coast (PADD 3), have continued to increase. Year-to-date product exports through June 2014 (the latest month for which data are available) averaged 3.7 million barrels per day up 543,000 barrels daily over last year. Exports include gasoline, distillate, jet fuel, petroleum coke, and hydrocarbon gas liquids (HGL). Increased exports from the Gulf Coast have accounted for 72% of the growth in total U.S. exports.

Natural Gas

According to EIA: The net injection reported for the week ending August 29 was 79 Bcf, 23 Bcf larger than the five-year average net injection of 56 Bcf and 19 Bcf larger than last year’s net injection of 60 Bcf. Working gas inventories totaled 2,709 Bcf, 471 Bcf (14.8%) less than last year at this time and 495 Bcf (15.4%) below the five-year (2009-13) average.

Additions to storage for the total injection period starting during the week ending April 4 have reached 1.87 Tcf. Working natural gas in underground storage remains below the lowest level of the past five years at this point in the injection season. For the past five years, comparable injections averaged 1.390 Tcf. There are nine weeks left in the traditional injection period. Additions to stocks will have to average 127 Bcf weekly to match the five-year average peak injection.

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