Energy Prospectus

On Friday, August 10 WTI closed at $54.17/bbl

Yesterday's short-covering rally took WTI from an opening price of $54.73 to $57.10 < BTW Tuesday was the 4th trading day in a row that WTI was up.
Today an unexpected build in U.S. crude oil inventories ESTIMATED by both API and EIA took WTI from an open of $56.72 to close at $55.22, which is about a $1 above the low for the day. The low for the day was at 12:15 ET soon after EIA released the details behind their summary that came out at 10:30AM ET.

So, WTI closed today $1.05/bbl HIGHER than where it closed on Friday.

The "blood bath" on the stock market (DOW down 800 points) thanks to the reported inverted yield curve took all of our stocks down with the overall selloff. The fundamentals have not changed for oil, but fund managers "throw the babied out with the bathwater" when the panic selling starts.

WTI might go lower tomorrow, but the fact that the resistance point just over $54/bbl held today during the worst day of the year on Wall Street and then moved higher in the afternoon to close over $55/bbl is encouraging (at least to me). There is technical resistance at $58, $60 and $61. Support at $54 and $52.

So far this month WTI has averaged more than the $55/bbl that I am using in all of my forecast/valuation models for Q3. My models assume WTI will average $60/bbl for all future periods.

So, here are some stats from the EIA's detailed report, which may have caused WTI to bounce off the low and close more than $1.00/bbl higher than the low.

U.S. oil production:
> Week ending 7/5: 12.3 million barrels per day
> Week ending 8/9: 12.3 million barrels per day AND STILL BELOW THE PEAK SET DURING THE WEEK OF 5/31. What's happened to the never ending surge in U.S. oil production?

Days of Supply: < IMO this is the #1 stat in EIA's weekly reports and no one seems to talk about it.
7/5 to 8/9
26.5 to 25.5 for crude oil
23.7 to 24.1 for gasoline
22.6 to 22.2 for jet fuel
33.9 to 31.1 for distillates

30 days of supply oil and refined productions is considered about right for a country whose economy is VERY DEPENDENT on oil based fuels.
25 days is cause for concern and 20 days is in the danger zone.

At the current days of supply for transportation fuels, if a major hurricane hits the Gulf Coast between Corpus Christi and New Orleans there will be MAJOR shortage across the nation. Hurricane Harvey took down more than half of U.S. refining capacity.
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PS: Oil prices react to a crude oil inventory build of 1.58 million barrels when U.S. refinery inputs were 121.1 million barrels for the same week.
Just remember that this is an industry with VERY LARGE NUMBERS.

Here is the link to the details behind the EIA's weekly report: https://www.eia.gov/dnav/pet/pet_sum_sn ... _nus_w.htm