Energy Prospectus

Summary of Weekly Petroleum Data for the week ending May 31, 2019

U.S. crude oil refinery inputs averaged 16.9 million barrels per day during the week ending May 31, 2019, which was 171,000 barrels per day more than the previous week’s average. Refineries operated at 91.8% of their operable capacity last week. Gasoline production increased last week, averaging 10.0 million barrels per day. Distillate fuel production increased last week, averaging 5.4 million barrels per day. < Refiners will be ramping up to more than 95% of capacity in June.

U.S. crude oil imports averaged 7.9 million barrels per day last week, up by 1,065,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 7.3 million barrels per day, 7.5% less than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1,095,000 barrels per day, and distillate fuel imports averaged 112,000 barrels per day.

> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 6.8 million barrels from the previous week. At 483.3 million barrels, U.S. crude oil inventories are about 6% above the five year average for this time of year. < Increase caused by big spike in imports above.
> Total motor gasoline inventories increased by 3.2 million barrels last week and are about 2% above the five year average for this time of year. Finished gasoline and blending components inventories both increased last week.
> Distillate fuel inventories increased by 4.6 million barrels last week and are about 3% below the five year average for this time of year.
> Propane/propylene inventories increased by 2.5 million barrels last week and are about 15% above the five year average for this time of year. < Depressing NGL prices.
>> Total commercial petroleum inventories increased last week by 22.4 million barrels last week.

Total products supplied over the last four-week period averaged 20.0 million barrels per day, down by 0.6% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 9.4 million barrels per day, down by 1.3% from the same period last year. Distillate fuel product supplied averaged 3.9 million barrels per day over the past four weeks, down by 0.8% from the same period last year. Jet fuel product supplied was up 2.0% compared with the same four-week period last year.

Dan,

In your opinion, what is driving the recent increase in crude imports to the US, what could happen to change that, and what is your opinion as to the chances of that happening? These imports, it could be argued, are a major factor driving US inventory levels up, in turn influencing WTI price.

Thanks.

First of all, remember that there is ~90 day lag between Middle East production and that oil being delivered to the U.S. Gulf Coast. So...the impact of the big drop in Iran's exports aren't reflected in any U.S. or OECD onshore storage tanks. Also, imports don't just show up, someone (usually a refiner) orders them. Refiners knowing that the summer spike in demand for transportation fuels is coming wanted to build up crude oil feedstock inventories. The oil delivered last week was ordered months ago when refiners thought oil prices were going up.

Refined product inventories are still very low based days of supply:
From details of today's EIA report ( check for yourself here: https://www.eia.gov/dnav/pet/pet_sum_sn ... _nus_w.htm )
Crude oil = 28.9 days of supply
Gasoline = 22.5 days of supply < dangerously low during hurricane season
Jet fuel = 21.7 days of supply
Distillates = 33.3 days of supply

Per EIA's estimates, U.S. refinery inputs were 17,227,000 barrels per day last week. That compares to U.S. refinery capacity of 18,767,000 barrels per day. So... U.S. refiners will ramp up to close to 18,000,000 barrels of oil per day by the end of June, drawing more oil from storage. AND it takes more black oil to make summer blend gasolines. U.S. refining capacity is much higher than it was five years ago, so comparing inventories to the 5-year average is misleading.

I have a hunch that more oil is coming to the U.S. because (a) speculators see higher oil prices coming and the U.S. is the safest place to store physical oil, (b) U.S. refiners have made adjustments to produce fuels that will comply with IMO2020 and other refineries in Europe and Asia have not and (c) refiners want to build inventory before hurricane season. This is all speculation on my part.

Putting additional pressure on oil prices: EIA also reported a 200,000 BOPD week to week increase in U.S. oil production. Based on how badly they missed U.S. production estimates in February and March, we should be extremely skeptical of that number. ALWAYS REMEMBER that EIA employees get paid by people that want lower fuel prices. I've been watching these reports for decades and believe EIA and IEA have a bias to report numbers that keep refined product prices low.

This does not all add up in my mind. We haven’t been the recipient of Iranian oil for years but have previously had a steady appetite for Venezuela oil which has been on steady decline and now subject to sanctions. The production from the Permian is constrained due to pipeline shortage. Seems like refineries would already be at their suggested optimum capacity (95%+) if the demand was there. I beginning to think the second quarter spike in demand that has been expected is not going to materialize. Sure hope I’m wrong.

I certainly don’t trust anything reported by a government agency as being credible with verification, but the API data seems to confirm the EIA data at least this week.

Yes, we don't get Iranian oil but it does go into the global supply allowing more other oil to come here. What may be happening is that demand in Europe is down, so more oil can come here.

Yes, EIA and API weekly numbers are pure WAGs and they are often much different from each other. Just look at how far EIA was off for February and March U.S. oil production (the most recent "actuals" we have). However, of all the numbers that EIA reports each week inventories should be the most accurate (doesn't mean that they are). Just keep in mind that this is an industry with VERY BIG numbers. For example, that 6.8 increase in U.S. crude oil inventories for the week is less than 10 hours of throughput for U.S. refineries.

I just think the very low days of supply that we have for gasoline and jet fuel is not getting the attention that it deserves. Refinery maintenance period went on much longer this year because of IMO-2020 requirements.

We’ll see. But another weekly build and we’ll be back in the 40’s.