Energy Prospectus

Per EIA's "WAG": Crude oil stocks rose by 5,778 MBBL last week to 438,132 MBBL from 432,354 MBBL. This is 15% below the 516,340 MBBL that was in storage at this point last year, and is marginally below the five-year average.

The market over reacted as it usually does to EIA's weekly "guess"

Raymond James said this .....

This week's petroleum inventories update was bearish relative to consensus. ''Big Three'' inventories (crude, gasoline, distillates - with crude including the SPR draw) rose by 6.0 MMBbls, versus consensus estimates for a draw of 4.7 MMBbls. Commercial crude inventories rose by 5.8 MMBbls, versus consensus calling for a draw of 2.0 MMBbls. Cushing crude inventories declined by 1.1 MMBbls, while Gulf Coast inventories were up 3.2 MMBbls. Gasoline posted a build of 1.9 MMBbls versus consensus calling for a draw of 1.4 MMBbls; and distillate inventories posted a draw of 1.0 MMBbls (which remain at a more than three-year low), broadly in line with consensus. Total petroleum inventories were up 6.7 MMBbls.

As always, regardless of their week-to-week movements, U.S. inventories do not constitute a holistic picture of global (or even total OECD) inventories, but they represent the only ''real-time'' data source.

Refinery utilization rose to 91.8% from 91.1% last week. Total petroleum imports were 11.0 MMBbls per day, up from last week's 9.8 MMBbls per day. Total petroleum product demand increased 0.6% after last week's 0.1% decrease. On a four-week moving average basis, there is a 1.5% y/y increase in total demand. U.S. (lower 48) production was 10.25 MMBbls per day, up 0.03 MMBbls per day from last week. As always, weekly demand and supply figures are provisional estimates subject to frequent revisions.

With oil prices (at least on the front end of the futures curve) having rallied to four-year highs, this reflects several supportive fundamental factors. The larger U.S. producers are exhibiting restraint in capital allocation; OPEC’s production discipline remains intact; there are still supply declines in several non-OPEC geographies (e.g., Mexico), alongside ongoing supply disruptions/challenges (especially Venezuela) and headline risk surrounding Iran; and the picture for global demand growth is broadly upbeat. The 12-month futures strip ($69.54/Bbl for WTI and $77.18/Bbl for Brent) shows a slightly backwardated near-term curve for both WTI and Brent. Several wild cards remain in play, such as: 1) on the bullish side, the possibility of supply disruptions above and beyond the current ones; and 2) on the bearish side, the prospect of further strength in the U.S. dollar.