Energy Prospectus

The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 8.94 million barrels in the week ended August 11.

Market analysts' expected a crude-stock decline of around 3.06 million barrels, while the American Petroleum Institute late Tuesday reported a supply-drop of 9.16 million barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, increased by 678,000 barrels last week, the EIA said.

The report also showed that gasoline inventories rose by 253.000 barrels.

For distillate inventories including diesel, the EIA reported a fall of 18.000 barrels.
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My Take: With such a bid draw from storage you would expect to see a spike up in oil prices. However, EIA also reported that U.S. oil production increased by 79,000 bbls per day during the week ending 8/11. Keep in mind that of all the stats that's EIA reports each week, U.S. production is the most "Wild Ass Guess". The government does not have any way of knowing what actual production is from week to week.
Of the stats they report, crude oil in storage is probably the most accurate.
Refined product inventories (i.e. - gasoline and distillates) are WAGs because they have no way of knowing how much is in the 100,000+ retail outlets.

Reminder: EIA's weekly reports overstated April crude oil production by more than 200,000 BOPD and May's production was overstated by more than 150,000 BOPD. May is the latest month that we have actual production data for. See: https://www.eia.gov/dnav/pet/pet_crd_cr ... mbbl_m.htm

Technical Analysis for WTI:

Resistance levels: 47.99, 48.40-42, 49.00*

Support levels: 47.31*+/-, 46.50-20

Trend : Sdwys

Swing Target: 48.00

Range Reversal: 47.31

The market remains in near term corrective selloffs with trade attacking 47.31* support. A close under 47.31* is short term negative and could add to selloffs below 46.50-. If trade again holds 47.31*+/-, be alert for a bounce back to recovery action inside Monday's range. A close over 49.00* is needed to rekindle bull trend forces.

Crude oil storage levels are falling because U.S. refineries are running at 96.1% of capacity. The refiners have not been running this high since August, 2015 and they have more capacity today, so they are drawing more crude oil from storage than ever before.

Let's assume that refiners are not stupid. My bet is that they have a very good handle on what demand is for refined products. Remember, U.S. refiners can export all of their refined products and South America is very dependent on a steady supply from the U.S.

Commercial U.S. crude oil storage capacity is ~640 million barrels.
> Oil in storage peaked at 533,977,000 barrels the week ending 3/24/2017.
> It has declined by 67,485,000 bbls to 466,492,000 bbls as of 8/11/2017.
So, the average decline since late March (20 weeks) has been 3,374,250 barrels per week. The rate of decline has accelerated recently, just as I have been telling you that it would in my weekly podcasts. The rate of decline may slow a bit after September, but it will keep declining unless OPEC abandons their agreement (highly unlikely).

Most of the reports that I've seen say the proper amount of crude oil inventory for the U.S. is around 400 million barrels. Raymond James recently published an extensive report on this topic and they say the proper storage level for the U.S. is now around 465 million barrels. Obviously, if demand for refined products keeps going up, we need more crude oil inventory.

At last week's refinery run rate, we have only 26.7 days of crude oil supply in commercial inventory. In my opinion, we should have more than 30 days of supply in inventory. We definitely NEVER want to run out of feedstock for something as critical to our economy as oil is.

China’s General Administration of Customs reported that the country’s refinery demand fell by 500,000 bpd (barrels per day) to 10.7 MMbpd (million barrels per day) in July 2017, the lowest level since September 2016. China is the second-largest consumer of crude oil. A fall in Chinese refinery demand may have a negative impact on crude oil prices.