Energy Prospectus

Summary of Weekly Petroleum Data for the week ending May 3, 2019

U.S. crude oil refinery inputs averaged 16.4 million barrels per day during the week ending May 3, 2019, which was 41,000 barrels per day less than the previous week’s average. Refineries operated at 88.9% of their operable capacity last week. Gasoline production increased last week, averaging 10.1 million barrels per day. Distillate fuel production decreased last week, averaging 5.1 million barrels per day. < Refiners must ramp up to 95% of capacity soon to meet summer demand for gasoline and diesel.

U.S. crude oil imports averaged 6.7 million barrels per day last week, down by 721,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.8 million barrels per day, 15.6% less than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1,114,000 barrels per day, and distillate fuel imports averaged 111,000 barrels per day.

> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.0 million barrels from the previous week. At 466.6 million barrels, U.S. crude oil inventories are at the five year average for this time of year.
> Total motor gasoline inventories decreased by 0.6 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 decreased last week.
> Distillate fuel inventories decreased by 0.2 million barrels last week and are about 5% below the five year average for this time of year.
> Propane/propylene inventories increased by 1.0 million barrels last week and are about 17% above the five year average for this time of year.
>> Total commercial petroleum inventories decreased last week by 1.7 million barrels last week.

Total products supplied over the last four-week period averaged 20.2 million barrels per day, down by 0.3% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.5 million barrels per day, up by 0.3% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels per day over the past four weeks, down by 9.7% from the same period last year. Jet fuel product supplied was up 6.7% compared with the same four-week period last year.

The Devil is in the Details: Gasoline and Jet Fuel inventories are now below the 5-year range for days of supply. Considering how important these transportation fuels are to the U.S. economy, I think the refiners have some serious work to do.

Comments below are from Raymond James:

This week's petroleum inventories update was bullish relative to consensus. "Big Three" petroleum inventories (crude, gasoline, distillates - including SPR) fell by 5.6 MMBbls, versus consensus estimates calling for a build of 0.4 MMBBls. As we have pointed out, now that OPEC supply cuts are showing up in the U.S., we expect normal seasonality to carry draws (notwithstanding week-to-week volatility). Turning to crude, total inventories (including SPR) fell by 4.8 MMBbls versus consensus calling for a build of 1.9 MMBbls and a normal seasonal draw of 3.4 MMBbls. Normal seasonality shows crude stocks building through April, before drawing as refiners exit maintenance and into the summer driving season. Refinery utilization fell to 88.9% from 89.2% last week. Total petroleum product demand increased 1.3% after last week’s 1.4% decrease. On a four-week moving average basis, there is a 0.3% y/y decrease in total demand.

Following the strong bounce year-to-date, the oil market is approaching last year’s highs. As sentiment on oil continues to improve, we see a broadly supportive fundamental backdrop: the larger U.S. producers are exhibiting restraint in capital allocation; OPEC+Russia’s production cuts are noticeably contributing to inventory draws, with OPEC supply at four-year lows; U.S. sanctions against Iran are becoming more impactful; the picture for global demand growth is broadly upbeat; and IMO 2020 is looming eight months from now. The 12-month futures strip ($60.68/Bbl for WTI and $67.17/Bbl for Brent) shows modest backwardation for both Brent and WTI; for comparison, our recently raised 2019 forecast is $66 WTI/$74.50 Brent, and the 2020 forecast is $92.50 WTI/$100 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, such as the fluid political situation in Venezuela; and 2) on the bearish side, the prospect of global macro slowdown (including risks from trade conflicts) and resulting impact on oil demand.

If you'd like to see the details behind RJ's new forecast of $92.50/bbl WTI in 2020, just send an email to energyprospectus@gmail.com and say "Please send me the Raymond James oil price forecast".