Crude Oil Storage Report - August 24

[dan_s]

(Reuters) - U.S. crude stocks rose last week as refineries cut output, while gasoline and distillate stocks rose modestly, the U.S. Energy Information Administration said on Wednesday.

Crude inventories rose by 2.5 million barrels in the last week, compared with expectations for a decrease of 455,000 barrels.

Refinery crude runs fell by 186,000 barrels per day, EIA data showed. Refinery utilization rates fell by 1 percentage point.

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 375,000 barrels, EIA said.


Gasoline stocks were up by 36,000 barrels, compared with expectations in a Reuters poll for a 1.2 million-barrel drop.

Distillate stockpiles , which include diesel and heating oil, rose by 122,000 barrels, versus expectations for a 400,000-barrel increase, the EIA data showed.

U.S. crude imports rose last week by 449,000 barrels per day

[dan_s]

API announced this week that gasoline deliveries in July were the highest on record. Total motor gasoline deliveries, a measure of consumer gasoline demand, moved up 2.4% from July 2015, to average nearly 9.7 million barrels per day. Compared with June 2016, total motor gasoline deliveries increased 0.3%. For year-to-date, total motor gasoline deliveries increased 2.5% compared with year-to-date 2015 to a record level just above 9.3 million barrels per day.

“Gasoline deliveries, a measure of consumer demand, hit their highest level on record in July,” said Erica Bowman, API chief economist. “With this indication of increased demand, it’s clear that consumers have continued to benefit from lower gasoline prices at the pump.”

The numbers reported by API don’t always see eye to eye with the EIA, but often the discrepancies are minimal. In this case, the differences are present, but the overall message to the market remains the same, gasoline inventories are shrinking and consumer demand is kicking up. With the focus the gasoline glut has received, this will likely be good news for oil prices moving forward.

According to API, U.S. total petroleum imports in July averaged just below 10.5 million barrels per day, up 6.8% from the prior month and up 9.9% from the prior year, but was the fourth lowest total petroleum imports for the month of July in 19 years, since 1997.

Oil prices were up earlier in the week on rumors of OPEC production cuts coming from meetings scheduled in September and October. Iraq Prime Miniter Haider Al-Abadi countered this news by saying that Iraq is not currently willing to cap production and believes that Iraq should be bringing more crude to market.

The varying rhetoric from OPEC in recent weeks comes amidst wild speculation on the status of the cartel and if new alliances may be forming with unilateral cartels interests waning. Russia has jumped into the mix of these meetings, there has been speculation on where Iran’s loyalties lie, and the largest producers in OPEC (Iraq and Saudi Arabia) continue to increase production to retain market share.

[Orindakid]

I find it interesting that as US production is declining that US inventories are not declining very much. It seems that the refiners/oil companies are just ramping up imports.
If there was a true surplus inventory in the US then you would think that imports would be less and inventories would be drawn down.
Dan do you think this is a strategy due to oil prices or something different?
Thanks

[dan_s]

Some oil in inventory is now held by investors. Just like gold, oil is a hedge against a falling dollar and inflation.

Put yourself in the shoes of the refiners. If you know U.S. production is one decline, wouldn't it be smart to build more crude inventory? Also, if you believe oil prices may go higher in 2017, isn't it wise to build up your inventory?

[Orindakid]

I spent some time this weekend looking at the OPEC Monthly Oil Market Report published on August 10th, which says this on page 81about OECD Oil Supplies.
"Preliminary data for June shows that total OECD commercial oil stocks fell by
28.9 mb to stand at 3,045 mb, around 138 mb higher than the same time one year ago
and 311 mb above the latest five-year average. Within components, crude and
products both fell, by 15.0 mb and 13.9 mb, respectively. OECD commercial stocks
saw their build slow since the beginning of the year; during the first half of the year the
OECD only added 30 mb, compared with 170 mb during the same time a year ago."
So it looks to me like weekly US Inventories aren't really that meaningful, and that OECD inventory might be more important to look at. Also I can't find any reference to OPEC inventories.... so not sure whether they are part of OECD inventories or just a non reported number.

I also agree with your comments that refineries are staying "topped up" with cheaper crude if they are expecting prices to rise in coming months, hence US inventories are not falling due to rising imports and maybe not all that important in the scheme of things....
Regards

[dan_s]

OECD is primarily the U.S., Canada and Europe. It does not include OPEC.