Energy Prospectus

Summary of Weekly Petroleum Data for the week ending April 26, 2019

U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week ending April 26, 2019, which was 137,000 barrels per day less than the previous week’s average. Refineries operated at 89.2% of their operable capacity last week. Gasoline production increased last week, averaging 9.9 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day. < Refiners should ramp up to ~95% utilization by the end of May.

U.S. crude oil imports averaged 7.4 million barrels per day last week, up by 265,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.8 million barrels per day, 19.2% less than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 770,000 barrels per day, and distillate fuel imports averaged 63,000 barrels per day.

> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 9.9 million barrels from the previous week. At 470.6 million barrels, U.S. crude oil inventories are at the five year average for this time of year.
> Total motor gasoline inventories increased by 0.9 million barrels last week and are about 2% below the five year average for this time of year. Finished gasoline and blending components inventories both increased last week. < Gasoline supplies are now down to 24 days of supply. Six weeks ago, EIA reported that we had 26 days of gasoline supply. Note that gasoline demand goes up a lot from the beginning to the end of May. The refiners have some work to do.
> Distillate fuel inventories decreased by 1.3 million barrels last week and are about 6% below the five year average for this time of year.
> Propane/propylene inventories increased by 1.2 million barrels last week and are about 21% above the five year average for this time of year. Total commercial petroleum inventories increased last week by 12.7 million barrels last week.
>> Total products supplied over the last four-week period averaged 20.2 million barrels per day, up by 0.5% from the same period last year.

Over the past four weeks, motor gasoline product supplied averaged 9.5 million barrels per day, up by 1.5% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the past four weeks, down by 9.6% from the same period last year. Jet fuel product supplied was up 1.7% compared with the same four-week period last year.

Phil Flynn (before the EIA report came out)

Oil is getting hit with shocks. No, I am not talking about the fact that waivers to buyers of Iranian crude go into effect. I am also not talking about the uprising in Venezuela. I am not talking about continued fighting in Libya. I am talking about the 6.81-million-barrel API build. Even bearish traders are left scratching their heads trying to figure out what caused this massive oil supply increase. Part of the answer may be in the fact that stocks in the Cushing Oklahoma delivery point increased by a whopping 1.35 million barrels, and maybe all the refinery outages slowed output. Yet even with that, the increase was stunning and almost inexplicable. We did see another big drop in products with a 1.06-million-barrel withdrawal on gasoline and an even more bullish 2.06 million barrel drop in distillate, but it is the big crude build that is grabbing all the attention.

This comes against an otherwise bullish backdrop. The situation in Venezuela is still hot but hopes that embattled Venezuelan President Nicolas Maduro might leave could be bearish as it would lift U.S. sanctions and allow people into the oil fields that might actually know what they are doing. We have the end of sanction waivers on Iran, but also bullish news on the supply side as well. OPEC production is plunging, and U.S. production is not as big as advertised.

Reuters reported that “OPEC oil supply hit a four-year low in April, a Reuters survey found, due to further involuntary declines in sanctions-hit Iran and Venezuela and output restraint by top exporter Saudi Arabia. The 14-member Organization of the Petroleum Exporting Countries pumped 30.23 million barrels per day (bpd) this month, the survey showed, down 90,000 bpd from March and the lowest OPEC total since 2015, the Reuters survey showed. The survey suggests that Saudi Arabia and its Gulf allies are maintaining even larger supply cuts than called for by OPEC’s latest deal, shrugging off pressure from U.S. President Donald Trump.”

Bottlenecks in shale as well as Gulf issues are impacting U.S. production. Reuters reported that “U.S. crude oil production fell 187,000 barrels per day in February to 11.7 million bpd as output dropped in the Gulf of Mexico and key on-shore oil producing states including Oklahoma and North Dakota, according to U.S. government data on Tuesday. The production decline was the second consecutive slip, following a fall in January, according to the U.S. Energy Information Administration data. Rising output to record levels due to increased production from onshore shale formations and an uptick in the Gulf of Mexico has made the U.S. the top global oil producer and has shifted global trade flows of crude. As a result, monthly production is closely watched. Crude output in the Gulf of Mexico dropped 9.8 percent from a month earlier to 1.7 million bpd, the EIA said in its monthly 914 production report. Production fell 4.6 percent to 1.3 million bpd in North Dakota and 1.1 percent to 573,000 bpd in Oklahoma. The losses were not offset by slight production increases in Texas and New Mexico where the Permian Basin, the largest U.S. oilfield, is located. Output in Texas, the largest-producing state, rose 1.3 percent to 4.8 million bpd, while in New Mexico, it rose 3.2 percent to 843,000 bpd.“

The EIA inventory report today will be big. The market wants to get a sense whether the API is out of their minds.

We also get the Fed decision today. They will not move rates, but the Fed fund futures are pricing in a cut because of the lack of inflation. Yet while President Donald Trump is calling for a full point rate cut, it is likely that the Fed may go in the other direction. They may damper expectations for a rate cut. That will be the big question for Chairman Jerome Powell. Whatever he says in the Press conference, we know that the President will not be happy.