The U.S. Energy Information Administration said in its weekly report that crude oil inventories increased by 3.5 million barrels in the week ended February 19. Market analysts' expected a crude-stock rise of 3.4 million barrels, while the American Petroleum Institute late Tuesday reported a supply gain of 7.1 million barrels.
Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, rose by 333,000 barrels last week, the EIA said, raising fears that the nation's largest storage facility is nearing full capacity.
Total U.S. crude oil inventories stood at 507.6 million barrels as of last week, remaining near levels not seen for this time of year in at least the last 80 years.
Gasoline inventories decreased by 2.2 million barrels, compared to expectations for a drop of 1.0 million barrels, while distillate stockpiles declined by 1.7 million barrels.
Oil Storage Report - Feb 24
Oil Storage Report - Feb 24
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Storage Report - Feb 24
Does this change your outlook?
Re: Oil Storage Report - Feb 24
No. Everyone expects storage to continue to build through April. Refiners will start drawing more crude from inventory in May to ramp up gasoline production. This happens every year.
By law, summer blends of gasoline in the United States cannot contain as much NGLs. This increases demand for crude oil by ~500,000 bbls per day and it explains why gasoline prices go up each summer.
Plus, demand for liquid fuels increases by 1.5 to 2.0 million barrels per day each summer, which you can see at the chart below.
https://www.iea.org/oilmarketreport/omrpublic/
By law, summer blends of gasoline in the United States cannot contain as much NGLs. This increases demand for crude oil by ~500,000 bbls per day and it explains why gasoline prices go up each summer.
Plus, demand for liquid fuels increases by 1.5 to 2.0 million barrels per day each summer, which you can see at the chart below.
https://www.iea.org/oilmarketreport/omrpublic/
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Storage Report - Feb 24
I accept what you say as a given. It therefore confounds me that there is so much noise about how much oil is in storage, etc. I do wonder why, though, this year seems to have so much more oil in storage at this moment then in past years.
Another point: I don't recall you talking about the impact of how the new oil and natgas export regs will affect any of the companies we follow, particularly the pipelines.
Another point: I don't recall you talking about the impact of how the new oil and natgas export regs will affect any of the companies we follow, particularly the pipelines.
Re: Oil Storage Report - Feb 24
For one thing, there is a lot more storage capacity today. The refiners are building storage because:
1. They see higher crude prices ahead, so they want to get as much of this low cost oil as they can.
2. Refiners see higher demand for refined products
3. Refiners see the potential for lower supply after this year. U.S. production is now falling.
PXD is the only company that I've seen which is excited about the ability to export crude. IMO it is a non-issue. With U.S. light oil production falling it is less of an issue than it used to be. It only makes sense to pay to ship oil to Europe if there is a big gap between Brent and WTI.
FYI the U.S. has approximately 640 million bbls of crude oil storage capacity. This is more of a FEAR than a reality.
1. They see higher crude prices ahead, so they want to get as much of this low cost oil as they can.
2. Refiners see higher demand for refined products
3. Refiners see the potential for lower supply after this year. U.S. production is now falling.
PXD is the only company that I've seen which is excited about the ability to export crude. IMO it is a non-issue. With U.S. light oil production falling it is less of an issue than it used to be. It only makes sense to pay to ship oil to Europe if there is a big gap between Brent and WTI.
FYI the U.S. has approximately 640 million bbls of crude oil storage capacity. This is more of a FEAR than a reality.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Storage Report - Feb 24
Very helpful. Thx.
Re: Oil Storage Report - Feb 24
Let me understand this. U.S. production is falling, but storage is growing. That tells me the real price of oil is below WTI, or why wouldn't the refiners reduce imports?
Re: Oil Storage Report - Feb 24
Not sure I understand your question.
More storage tanks have been built at commercial locations like Cushing and there is a lot more field level storage. The crude oil inventories EIA reports each week include about 100 million barrels of field level storage and pipeline fill. BTW EIA has no way of knowing that number each week. It is a pure SWAG on their part, based on formulas.
The amount of oil going into storage has increase for the three reasons mentioned above. Crude oil is "raw material" for the refiners. They want to build up as much of this low cost inventory as they can. Makes perfect sense if you think about it.
The actual prices that the producers get for their oil at the wellhead is based on a lot of things, primarily a contract with a marketing company that is tied to an index (like WTI or LLS). The price the producer gets could be a higher or lower price based on the quality of the oil. All crude oil is not the same. Location also matters, which is why Bakken oil sells (at the wellhead) for about $5/bbl less than STACK oil, which is very close to Cushing.
The U.S. will always be a major importer of oil. We now import 7.5 to 8.0 million barrels per day. Also, keep in mind that refiners can export their refined products, so they are not just producing gasoline, diesel, etc. for Americans.
More storage tanks have been built at commercial locations like Cushing and there is a lot more field level storage. The crude oil inventories EIA reports each week include about 100 million barrels of field level storage and pipeline fill. BTW EIA has no way of knowing that number each week. It is a pure SWAG on their part, based on formulas.
The amount of oil going into storage has increase for the three reasons mentioned above. Crude oil is "raw material" for the refiners. They want to build up as much of this low cost inventory as they can. Makes perfect sense if you think about it.
The actual prices that the producers get for their oil at the wellhead is based on a lot of things, primarily a contract with a marketing company that is tied to an index (like WTI or LLS). The price the producer gets could be a higher or lower price based on the quality of the oil. All crude oil is not the same. Location also matters, which is why Bakken oil sells (at the wellhead) for about $5/bbl less than STACK oil, which is very close to Cushing.
The U.S. will always be a major importer of oil. We now import 7.5 to 8.0 million barrels per day. Also, keep in mind that refiners can export their refined products, so they are not just producing gasoline, diesel, etc. for Americans.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group