Oil Price - March 30
Oil Price - March 30
Price of oil is getting support from what is on this chart: http://www.marketwatch.com/investing/index/dxy/charts
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - March 30
The U.S. Energy Information Administration said in its weekly report that crude oil inventories rose by 2.3 million barrels in the week ended March 25. Market analysts' expected a crude-stock rise of 3.3 million barrels, while the American Petroleum Institute late Tuesday reported a supply gain of 2.6 million barrels.
Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, fell by 272,000 barrels last week, the EIA said, compared to forecasts for a gain of 300,000 barrels.
Total U.S. crude oil inventories stood at an all-time high of 534.8 million barrels as of last week.
The report also showed that gasoline inventories decreased by 2.5 million barrels, compared to expectations for a drop of 2.2 million barrels, while distillate stockpiles fell by 1.1 million barrels.
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I have been watching these weekly reports for many years. Most of the time when the EIA reports a higher inventory build than expected (like last week), they report a lower than expected build or a draw the next week. The reason is that much of what they report on a weekly basis is a Wild Ass Guess based on formulas. Crude oil inventories reported by EIA include ~100 million bbls of field level storage and pipeline fill. Pipeline fill is fairly steady, but EIA has no way of knowing field level storage at any point in time.
Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, fell by 272,000 barrels last week, the EIA said, compared to forecasts for a gain of 300,000 barrels.
Total U.S. crude oil inventories stood at an all-time high of 534.8 million barrels as of last week.
The report also showed that gasoline inventories decreased by 2.5 million barrels, compared to expectations for a drop of 2.2 million barrels, while distillate stockpiles fell by 1.1 million barrels.
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I have been watching these weekly reports for many years. Most of the time when the EIA reports a higher inventory build than expected (like last week), they report a lower than expected build or a draw the next week. The reason is that much of what they report on a weekly basis is a Wild Ass Guess based on formulas. Crude oil inventories reported by EIA include ~100 million bbls of field level storage and pipeline fill. Pipeline fill is fairly steady, but EIA has no way of knowing field level storage at any point in time.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - March 30
Comments below from Tudor Pickering Holt.
Reducing US oil production – declining rig count driving steeper declines (WTI $38.64) We are refreshing our US oil basin supply forecast, last updated a couple months ago, as rig count blew through our ~670 rig assumption. We are currently assuming a <400 rig trough which decreases our production outlook with 2016 declines increasing from (500mbpd) y/y to (760mbpd) y/y and 2017 declines increasing from (300mbpd) to (520mbpd)…returning to growth in 2018 (+420mbpd). Updated Oil Production Available Upon Request.
Argentina’s January production: decrease in liquids as a result of lower activity. Gas growth – Liquids production of 524.9mbd was -1.4% m/m (-1.6% y/y) as land rig count drops from 90 in December ’15 to 71 in January. YPF produced 229mbd of oil which represented a 1.2% m/m drop (+2.4% y/y). Despite the rig count drop, gas production grew to 4.2Bcf/d (+3.5% y/y; +3% m/m) with YPF at 1.3Bcf/d (+0.6% m/m;+5% y/y). We expect liquids decline to endure in the near-term as activity continues to slow down (64 active rigs in February). YPF will reduce activity levels this year as a result of a 20-25% capex cut to ~$4.5B (flat production guidance at ~577mboed). However, we expect activity to pick-up in the mid-term as Argentina’s new government is focused on attracting investments, mainly in the Vaca Muerta, with a number of subsidies already in place.
Global oil demand update, Part I – A framework for bottoms-up & top-down analytical approaches, 2016 global growth estimate revised down to 825-850mbd (WTI $38.64) – We update our outlook for 2016-17 global oil demand by introducing a new bottoms-up analysis to supplement our previous top-down approach. We believe multiple layers of analysis are warranted given current uncertainties over the state of the oil supply/demand balance. The bottoms-up approach is in our view an important process in order to develop a deeper understanding of the regional and product forces that are most critical for oil demand. The two methods suggest 2016 global growth of around 825-850mbd, thus we lower our demand call to this range from our prior 1.0mbd projection. Our cursory analysis of 2017 suggests potential global demand growth in the range of 1.0-1.3mmbd. Slide deck available from your TPH representative.
Global oil demand update, Part II – Bottoms-up outtakes: gasoline needs to carry the day over declining distillate demand (WTI $38.64) – Our bottoms-up analysis suggests total 2016 global oil demand growth of 827mbd. Gasoline will clearly be the main driver of demand growth this year, as we forecast meaningful demand degradation of middle distillates. We forecast gasoline demand growth of 760mbd, partially offset by approximately 220mbd of distillate demand destruction. Fuel oil and other oil product demand could somewhat surprise to the upside, with potentially 285mbd of growth this year. Regionally, Asia demand will remain the most important upside factor as we expect total declines in LatAm, FSU and even the US.
Global oil demand update, Part III – Top-down outtakes: non-OECD GDP weakness lowers demand outlook (WTI $38.64) – Based on our top-down analysis, we lower our 2016 growth assumption from 1.0mmbd to 850mbd to account for possible lower GDP growth in the non-OECD. We assume non-OECD GDP growth of 3.5% compared to 4.5% previously – every 100bps change in GDP results in a corresponding 220mbd change in demand. We assume a low growth trajectory for the OECD as structural transportation fuel growth is partially offset by ongoing efficiency gains. Upside potential exists in 2016 if price elasticity gains seen in 2015 are evident again in 2016.
Global oil demand changes – what does it mean? (WTI $38.64) Mechanically, revising down crude oil demand from 1mmbpd to 850mbpd is merely bookkeeping and when coupled with lowering US oil production in ’16 (increased declines – see next bullet) results in no change to our outlook that oil markets tighten materially by year-end. That said, revising oil demand lower is a negative for sentiment even though we are well below the IEA’s +1.2mmbpd and are as confident as one can be about a demand outlook. Updated Global Supply and Demand Model Available Upon Request.
TPH is still holding with their prediction of $80/bbl WTI by year-end.
Reducing US oil production – declining rig count driving steeper declines (WTI $38.64) We are refreshing our US oil basin supply forecast, last updated a couple months ago, as rig count blew through our ~670 rig assumption. We are currently assuming a <400 rig trough which decreases our production outlook with 2016 declines increasing from (500mbpd) y/y to (760mbpd) y/y and 2017 declines increasing from (300mbpd) to (520mbpd)…returning to growth in 2018 (+420mbpd). Updated Oil Production Available Upon Request.
Argentina’s January production: decrease in liquids as a result of lower activity. Gas growth – Liquids production of 524.9mbd was -1.4% m/m (-1.6% y/y) as land rig count drops from 90 in December ’15 to 71 in January. YPF produced 229mbd of oil which represented a 1.2% m/m drop (+2.4% y/y). Despite the rig count drop, gas production grew to 4.2Bcf/d (+3.5% y/y; +3% m/m) with YPF at 1.3Bcf/d (+0.6% m/m;+5% y/y). We expect liquids decline to endure in the near-term as activity continues to slow down (64 active rigs in February). YPF will reduce activity levels this year as a result of a 20-25% capex cut to ~$4.5B (flat production guidance at ~577mboed). However, we expect activity to pick-up in the mid-term as Argentina’s new government is focused on attracting investments, mainly in the Vaca Muerta, with a number of subsidies already in place.
Global oil demand update, Part I – A framework for bottoms-up & top-down analytical approaches, 2016 global growth estimate revised down to 825-850mbd (WTI $38.64) – We update our outlook for 2016-17 global oil demand by introducing a new bottoms-up analysis to supplement our previous top-down approach. We believe multiple layers of analysis are warranted given current uncertainties over the state of the oil supply/demand balance. The bottoms-up approach is in our view an important process in order to develop a deeper understanding of the regional and product forces that are most critical for oil demand. The two methods suggest 2016 global growth of around 825-850mbd, thus we lower our demand call to this range from our prior 1.0mbd projection. Our cursory analysis of 2017 suggests potential global demand growth in the range of 1.0-1.3mmbd. Slide deck available from your TPH representative.
Global oil demand update, Part II – Bottoms-up outtakes: gasoline needs to carry the day over declining distillate demand (WTI $38.64) – Our bottoms-up analysis suggests total 2016 global oil demand growth of 827mbd. Gasoline will clearly be the main driver of demand growth this year, as we forecast meaningful demand degradation of middle distillates. We forecast gasoline demand growth of 760mbd, partially offset by approximately 220mbd of distillate demand destruction. Fuel oil and other oil product demand could somewhat surprise to the upside, with potentially 285mbd of growth this year. Regionally, Asia demand will remain the most important upside factor as we expect total declines in LatAm, FSU and even the US.
Global oil demand update, Part III – Top-down outtakes: non-OECD GDP weakness lowers demand outlook (WTI $38.64) – Based on our top-down analysis, we lower our 2016 growth assumption from 1.0mmbd to 850mbd to account for possible lower GDP growth in the non-OECD. We assume non-OECD GDP growth of 3.5% compared to 4.5% previously – every 100bps change in GDP results in a corresponding 220mbd change in demand. We assume a low growth trajectory for the OECD as structural transportation fuel growth is partially offset by ongoing efficiency gains. Upside potential exists in 2016 if price elasticity gains seen in 2015 are evident again in 2016.
Global oil demand changes – what does it mean? (WTI $38.64) Mechanically, revising down crude oil demand from 1mmbpd to 850mbpd is merely bookkeeping and when coupled with lowering US oil production in ’16 (increased declines – see next bullet) results in no change to our outlook that oil markets tighten materially by year-end. That said, revising oil demand lower is a negative for sentiment even though we are well below the IEA’s +1.2mmbpd and are as confident as one can be about a demand outlook. Updated Global Supply and Demand Model Available Upon Request.
TPH is still holding with their prediction of $80/bbl WTI by year-end.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group