Energy Prospectus

The American Petroleum Institute said late Tuesday that US crude stocks fell by 5.222 million barrels last week, while gasoline inventories rose by 2 million barrels and distillate stocks dipped 2.9 million barrels. Analysts had estimated that crude stocks would decline 3.769 million barrels, with a 870,000 barrels drop in distillates and a 1.895 million barrels build in gasoline seen. The API estimates will be followed today by official figures from the US Energy Information Administration.

Overnight, crude oil prices settled higher on Tuesday as investors mulled over the prospect of fresh Middle East supply disruptions amid rising geopolitical tensions in the region after reports Saudi air defences intercepted a missile fired at Riyadh.

Rising Middle East geopolitical tensions raised the prospect of supply disruptions after reports suggested that a missile was fired at Riyadh from Yemen.

“Coalition forces confirm intercepting an Iranian-Houthi missile targeting (the) south of Riyadh. There are no reported casualties at this time,” the government-run Center for International Communication wrote on its Twitter account.

Reports of the missile launch come as investors digested an update from operator of the Forties pipeline Ineos who said Tuesday that the timeframe for the fix remained two to four weeks starting from Dec. 11, the date of the shutdown.

The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 6.5 million barrels in the week ended December 15.

Market analysts' expected a crude-stock draw of around 3.8 million barrels, while the American Petroleum Institute late Tuesday reported a stronger than expected drop of 5.2 million barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, increased by 754,000 barrels last week, the EIA said.

The report also showed that gasoline inventories rose by 1.2 million barrels, compared to expectations for an increase of 1.9 million barrels.
For distillate inventories including diesel, the EIA reported an increase of 769,000 barrels.
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U.S. refinery utilization remains high (as I forecast it would in my podcasts) as they need to process more crude oil to rebuild refined product inventories. Inventories of gasoline and distillates were drawn way down after Hurricane Harvey shut down 30% of U.S. refining capacity for two month. Also, there is high demand for U.S. refined products overseas and the profit margins are also high because of the spread between Brent and WTI.

Have you noticed that each week the EIA reports a larger crude oil inventory decline than the "experts" are predicting? Could it be that Wall Street is doing everything it can to keep oil prices low for as long as they can? Why?, because low fuel prices are good for the overall economy.

The U.S. refinery utilization rate is 94.1% per the EIA's weekly report, which is about 3.5% higher than normal for this time of year. Demand for U.S. refined products is HIGH and is expected to remain HIGH because U.S. and overseas demand for gasoline and diesel is high. IEA always underestimates annual demand growth.

Per the last IEA Oil Market Report, they believe global oil supply and demand are in balance today. However, OECD inventories are falling by over a million barrels per day, which tells me a much different story.

Per EIA the total crude oil and refined products made from oil declined by 14,160,000 barrels for the week ending 12/15/2017. That is a BIG decline.

U.S. crude oil inventories are falling fast, at a time of year when they normally level off and then build in Q1. Refiners build crude inventories in Q1 in anticipation of increased demand in Q2.

Q2 demand for crude oil goes up at least a million barrels per day just because NGLs cannot be blended into the mix for summer blend gasoline. In 2017, demand for oil increased by 2.3 million barrels per day from Q1 to Q2. That will happen again in 2018 unless there is a significant global economic slowdown.

See details of the EIA weekly report here: https://www.eia.gov/dnav/pet/pet_sum_sn ... _nus_w.htm

Just in the last six weeks, U.S. crude oil days of supply has gone from 28.3 days to 25.6 days.

In my opinion, for a county whose economy must have a steady supply of oil, this is approaching a critical level.