EIA Weekly Petroleum Report - Mar 23

[dan_s]

Summary of Weekly Petroleum Data for the week ending March 18, 2022

U.S. crude oil refinery inputs averaged 15.9 million barrels per day during the week ending March 18, 2022 which was 276,000 barrels per day more than the previous week’s average.
Refineries operated at 91.1% of their operable capacity last week. < Refiners need to ramp up to 95% and stay there in order to stabilize transportation fuel inventories. Rationing of Diesel would be BAD for the US economy.
Gasoline production increased last week, averaging 9.8 million barrels per day.
Distillate fuel production increased last week, averaging 5.0 million barrels per day.

U.S. crude oil imports averaged 6.5 million barrels per day last week, up by 92,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.2 million barrels per day, 9.1% more than the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 721,000 barrels per day, and distillate fuel imports averaged 172,000 barrels per day.

Focus on the deficits to 5-year averages

> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.5 million barrels from the previous week. At 413.4 million barrels, U.S. crude oil inventories are about 13% below the five year average for this time of year. < Note that crude oil inventories are falling despite draws from the SPR.
> Total motor gasoline inventories decreased by 2.9 million barrels last week and are about 0% below the five year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week. < We are lucky to have plenty of light oil that can be refined into gasoline. Rationing of gasoline should not be necessary.
> Distillate fuel inventories decreased by 2.1 million barrels last week and are about 17% below the five year average for this time of year.
> Propane/propylene inventories increased by 0.3 million barrels last week and are about 23% below the five year average for this time of year.
>> Total commercial petroleum inventories decreased by 6.7 million barrels last week.

Total products supplied over the last four-week period averaged 21.0 million barrels a day, up by 11.7% from the same period last year.
Over the past four weeks, motor gasoline product supplied averaged 8.8 million barrels a day, up by 4.0% from the same period last year.
Distillate fuel product supplied averaged 4.3 million barrels a day over the past four weeks, up by 8.6% from the same period last year.
Jet fuel product supplied was up 43.7% compared with the same four-week period last year.
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MY TAKE:
> Deficits to the 5-year average inventories for crude oil and distillates increased from last weeks report.
> We are just a few weeks away from the annual spike up in demand for transportation fuels.
> Diesel prices are $1.00 to $2.00 per gallon higher than gasoline across the nation. This increases the price of EVERYTHING; inflation will get worse.
> The US economy runs on diesel. Planting of crops requires lots of diesel. The country's supply chain problems cannot be solved without an abundant supply of diesel and today we have a significant shortage of diesel.
> Ultra-light shale oil cannot be refined into diesel. US needs more heavy oil from Canada to offset no more Russian oil. Importing heavy oil from Venezuela might be required soon.
> Propane inventories must be rebuilt before the next winter arrives. This will keep NGL prices high all year.
Conclusion: We have a real "Energy Crisis" that has no near-term solution. Petroleum products will first be "rationed by price" and physical rationing of diesel may be required this summer.

[dan_s]

VERY IMPORTANT: The sanctions against Russia have very little to do with this:

AEGIS Note: "Oil Inventories for the U.S. are now at a deficit of 89.00 MMBbls (-17.7%) to last year, and a deficit of 58.60 MMBbls (-12.4%) to the five-year average."

[KGardiner]

Dan, which of the EPG portfolio companies produce significant heavy oil that can be refined into diesel?

TALOS, Ovintiv?

[dan_s]

Hemisphere Energy (HMENF) is a pure play on Heavy Oil and it trades at a deep discount to my valuation.

Older large-caps with some conventional oil that is "heavier" than the ultra-light shale oil are CTRA (due to merger with XEC), CLR, EOG, OVV, PDCE, REPX, SM and TALO. < These really aren't "Heavy Oil" producers, but their WTI quality oil can be refined into diesel.

[KGardiner]

Thanks Dan

[dan_s]

Since Hemisphere has not yet released Q4 results, my valuation of $2.20US is based on my old oil price deck. Based on my new oil price deck of $100US in 2022 and $90US in 2023, my valuation of HMENF will be over $2.50US per share.