EIA Weekly Liquids Report - August 1

[dan_s]

Comments below are from Raymond James with my thoughts in BLUE. - Dan

This week's petroleum inventories update was bearish relative to consensus. ''Big Three'' petroleum inventories (crude, gasoline, distillates) rose by 4.3 MMBbls, versus consensus estimates for a draw of 4.5 MMBbls. Crude inventories rose by 3.8 MMBbls, versus consensus projecting a draw of 3.0 MMBbls. Cushing crude inventories declined by 1.3 MMBbls, with Gulf Coast inventories up 5.6 MMBbls. < Weekly fluctuations on crude oil are all because of the timing of tanker deliveries.

Gasoline posted a draw of 2.5 MMBbls, versus consensus predicting a draw of 2.0 MMBbls, while distillate inventories rose by 3.0 MMBbls, versus consensus expecting a build of 0.5 MMBbls. Total petroleum inventories were up 10.6 MMBbls. < Distillates are still way too low.

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 96.1% from 93.8% last week. Total petroleum imports were 10.0 MMBbls per day, down from last week's 10.3 MMBbls per day. Total petroleum product demand decreased 5.2% after last week's 1.9% increase. On a four-week moving average basis, there is a 0.6% y/y uptick in total demand.

U.S. (lower 48) production was 10.6 MMBbls per day, unchanged from last week (recall, the EIA began rounding to the nearest 100,000 Bbls per day as of June). As always, weekly demand and supply figures are provisional estimates subject to frequent revisions.

With oil prices having come down from four-year highs earlier this summer, we continue to see a supportive fundamental backdrop: the larger U.S. producers are exhibiting restraint in capital allocation; OPEC+Russia's gradual unwinding of production cuts is being offset by declines in Venezuela and, to a lesser extent, the latest supply outage in Libya; there are still supply declines in several non-OPEC geographies (e.g., Mexico); and the picture for global demand growth is broadly upbeat. Meanwhile, the impact of Permian midstream bottlenecks is likely to result in a renewed ''blowout'' in the Brent-WTI spread. The 12-month futures strip ($65.79/Bbl for WTI and $72.64/Bbl for Brent) shows a slightly backwardated near-term curve for Brent and a steeply backwardated WTI curve (at least in the front couple of months). 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.