Summary of Weekly Petroleum Data for the week ending January 31, 2020
U.S. crude oil refinery inputs averaged 16.0 million barrels per day during the week ending January 31, 2020, which was 48,000 barrels per day more than the previous week’s average. Refineries operated at 87.4% of their operable capacity last week.
Gasoline production increased last week, averaging 9.9 million barrels per day.
Distillate fuel production decreased last week, averaging 5.0 million barrels per day.
U.S. crude oil imports averaged 6.6 million barrels per day last week, down by 46,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.6 million barrels per day, 12.3% less than the same four-week period last year. < Keep in mind that crude oil inventories must build in Q1 because the refiners will need the raw material as they must ramp up transportation fuel production in Q2. It happens each year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 676,000 barrels per day, and distillate fuel imports averaged 194,000 barrels per day.
> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.4 million barrels from the previous week. At 435.0 million barrels, U.S. crude oil inventories are about 2% below the five year average for this time of year.
> Total motor gasoline inventories decreased by 0.1 million barrels last week and are about 4% above the five year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week.
> Distillate fuel inventories decreased by 1.5 million barrels last week and are about 4% below the five year average for this time of year.
> Propane/propylene inventories increased by 0.6 million barrels last week and are about 37% above the five year average for this time of year.
>> Total commercial petroleum inventories decreased last week by 0.9 million barrels last week.
Total products supplied over the last four-week period averaged 20.3 million barrels per day, down by 4.7% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.7 million barrels per day, down by 3.1% from the same period last year.
Distillate fuel product supplied averaged 3.9 million barrels per day over the past four weeks, down by 12.4% from the same period last year.
Jet fuel product supplied was down 0.5% compared with the same four-week period last year.
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Aegis Energy: "EIA reported a build of 3355 MBbls in U.S. crude-oil inventories for the week ending 1/31/2020. This was larger than the average estimate of 2876 MBbls as reported by Bloomberg. Prices were up five minutes following the announcement, to $51.70, from $51.46 just before 9:30am."
MY TAKE: FEARs related to the corona virus are the only reason for the big drop in oil prices. That fear is likely to decline within a few months. U.S. oil production probably peaked in early December and will go on decline in Q1.
EIA - Petroleum Status Report - Feb 5
EIA - Petroleum Status Report - Feb 5
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: EIA - Petroleum Status Report - Feb 5
Oil Finds Bottom As Coronavirus Breakthrough Is Reported
US futures and European stocks gained and Treasuries tanked as virus optimism ran wild on reports that a key breakthrough was made in the search for a coronavirus cure. Markets are still primarily focused on the coronavirus and today’s news that H.I.V and flu drugs show promise in treating the coronavirus will keep the risk-on rally going strong. China’s Health Commission lead researcher Li Lanjuan will propose the combination of Arbidol and Darunavir as the latest version of the government’s treatment plan. Li did not specify how many patients have been successfully treated with the combination therapy.
UK scientists are also claiming a significant vaccine breakthrough, delivering another boost in the overall positive sentiment. It seems, the world is nearing a cure for the coronavirus and that could mean markets may only need to price in only one bad quarter of data for China. Financial markets may get overly optimistic on these early headlines, but the playbook remains once Wall Street is beyond the virus, risky assets will remain supported on central bank stimulus and the global growth rebound story.
US stocks did come down slightly from the pre-market highs after the WHO reiterated that there has been no known breakthrough in the treatment to date. The WHO will hold a press conference at 10:00 am EST.
Safe-Havens
While researchers will embrace the breakthroughs made in treating the virus, they would say it is still too early to assess the overall effectiveness. With US stocks almost recovering all of the declines from coronavirus led selloff, safe-havens are likely to give back a majority their gains.
Both gold and Treasuries are getting sold on optimism the virus was contained and that researchers are getting closer to finding a cure. Treasury yields are higher across the board, with the 10-year yield jumping 3.8 basis points to 1.637%. The yield curve between the three-month and 10-year is no longer inverted and many economists may feel this recent inversion may end up being a false alarm for a recession like the ones in 1966 and 1998.
Gold volatility will remain in place as investors need to rebalance their reasons for holding onto the precious metal. The latest virus breakthrough news is bearish for gold prices, but it does bring the focus back to the global growth rebound story of 2020, which could eventually lead to a weaker dollar. Gold may lose its recent gains that stemmed from coronavirus concerns, but the longer-term outlook will be attractive as European recovery could finally lead to a stronger euro, thus weaker dollar.
Oil
Oil’s bloodbath could be over after researchers announce the breakthrough in creating a coronavirus vaccine. Energy traders might start pricing a return to normalcy in Chinese demand for crude in the second quarter. Scientists will need a lot more time to test and confirm the recent breakthroughs, but West Texas Intermediate crude might not wait to retest the mid-$50s as optimism will run high that the demand shock for crude is nearing an end.
If OPEC + is smart, they would take this opportunity to deliver a short-term commitment of deeper production cuts. OPEC + was set to respond if oil prices collapsed even further, but they should not use today’s positive news to punt the decision. Even if no additional cuts are outlined today, oil prices could remain bid.
US futures and European stocks gained and Treasuries tanked as virus optimism ran wild on reports that a key breakthrough was made in the search for a coronavirus cure. Markets are still primarily focused on the coronavirus and today’s news that H.I.V and flu drugs show promise in treating the coronavirus will keep the risk-on rally going strong. China’s Health Commission lead researcher Li Lanjuan will propose the combination of Arbidol and Darunavir as the latest version of the government’s treatment plan. Li did not specify how many patients have been successfully treated with the combination therapy.
UK scientists are also claiming a significant vaccine breakthrough, delivering another boost in the overall positive sentiment. It seems, the world is nearing a cure for the coronavirus and that could mean markets may only need to price in only one bad quarter of data for China. Financial markets may get overly optimistic on these early headlines, but the playbook remains once Wall Street is beyond the virus, risky assets will remain supported on central bank stimulus and the global growth rebound story.
US stocks did come down slightly from the pre-market highs after the WHO reiterated that there has been no known breakthrough in the treatment to date. The WHO will hold a press conference at 10:00 am EST.
Safe-Havens
While researchers will embrace the breakthroughs made in treating the virus, they would say it is still too early to assess the overall effectiveness. With US stocks almost recovering all of the declines from coronavirus led selloff, safe-havens are likely to give back a majority their gains.
Both gold and Treasuries are getting sold on optimism the virus was contained and that researchers are getting closer to finding a cure. Treasury yields are higher across the board, with the 10-year yield jumping 3.8 basis points to 1.637%. The yield curve between the three-month and 10-year is no longer inverted and many economists may feel this recent inversion may end up being a false alarm for a recession like the ones in 1966 and 1998.
Gold volatility will remain in place as investors need to rebalance their reasons for holding onto the precious metal. The latest virus breakthrough news is bearish for gold prices, but it does bring the focus back to the global growth rebound story of 2020, which could eventually lead to a weaker dollar. Gold may lose its recent gains that stemmed from coronavirus concerns, but the longer-term outlook will be attractive as European recovery could finally lead to a stronger euro, thus weaker dollar.
Oil
Oil’s bloodbath could be over after researchers announce the breakthrough in creating a coronavirus vaccine. Energy traders might start pricing a return to normalcy in Chinese demand for crude in the second quarter. Scientists will need a lot more time to test and confirm the recent breakthroughs, but West Texas Intermediate crude might not wait to retest the mid-$50s as optimism will run high that the demand shock for crude is nearing an end.
If OPEC + is smart, they would take this opportunity to deliver a short-term commitment of deeper production cuts. OPEC + was set to respond if oil prices collapsed even further, but they should not use today’s positive news to punt the decision. Even if no additional cuts are outlined today, oil prices could remain bid.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: EIA - Petroleum Status Report - Feb 5
Comments below are from Goehring & Rozencwajg Natural Resource Market Commentary
Market watchers are extremely concerned at present with the recent outbreak of Coronavirus that started in Wuhan.
We are monitoring the situation very closely, but believe the impact to global oil demand will likely be muted unless things get materially worse.
During the 2002-2003 SARS outbreak, markets were equally concerned, although in retrospect
global oil demand did not weaken at all and instead grew by a very strong 2.0 m b/d.
Looking forward to 2020, we expect global oil markets will be in deficit helping put upward
pressure on prices. According to the most recent IEA data, global demand is expected to
average 101.6 m b/d, representing growth of 1.3 mm b/d year-on-year. The balancing item,
which mysteriously vanished in the second half, will likely re-emerge in 2020 as industrial
buying in China and India resumes. Whereas 2018 saw a balancing item of 1.0 m b/d, we
prefer to be conservative in 2020 and are only modeling 200,000 b/d. That would result in
global demand averaging 101.8 m b/d.
The IEA expects US production will grow by 1.2 m b/d to 18.26 m b/d. Despite being more
conservative than the EIA, we still think this figure is too optimistic. Driven by the slowing
rig count and muted productivity trends we explained earlier, we believe the US total liquids
(including NGLs) will only grow by 900,000 b/d to 17.96 m b/d. The IEA expects the rest
of the non-OPEC world will grow by 900,000 b/d driven by Norway and Brazil. As we
explained, this underestimates base declines materially and we believe non-OPEC ex US
will only grow by 450,000 b/d to reach 43 m b/d. Given processing gains, biofuels and
OPEC NGLs (produced outside the OPEC quota system), we expect total non-OPEC
liquids production of 71.7 m b/d, leaving the call on OPEC crude at 30 m b/d. OPEC
produced 29.44 m b/d in December and has announced further cuts totaling approximately
400,000 b/d. This would leave global oil markets undersupplied in 2020 by nearly 1.0 m b/d.
If we are correct, inventories will decline materially throughout the year. As our readers
know, we use inventories as our “mile-marker” to tell us if we are on the right path. We
accurately predicted seasonally-adjusted inventories would decline sharply beginning in
early 2017 (at a time when few others agreed with us). We were correct and inventories fell
at their fastest pace on record throughout all of 2017 and the first six months of 2018. Since
then, the global oil markets have been buffeted by both Iranian-sanction confusion (see our
Q1 2019 letter) and trade war impacts. While we had expected inventories would keep
declining, they built relative to seasonal averages from June 2018 until August 2019. While
this has been disappointing, our models tell us the worst is now behind us and that inventories
will resume their declines relative to seasonal averages, as we progress through 2020.
-------------------------------------
All of you should listen to Core Labs Q4 conference call. https://www.corelab.com/investors/webcast
Market watchers are extremely concerned at present with the recent outbreak of Coronavirus that started in Wuhan.
We are monitoring the situation very closely, but believe the impact to global oil demand will likely be muted unless things get materially worse.
During the 2002-2003 SARS outbreak, markets were equally concerned, although in retrospect
global oil demand did not weaken at all and instead grew by a very strong 2.0 m b/d.
Looking forward to 2020, we expect global oil markets will be in deficit helping put upward
pressure on prices. According to the most recent IEA data, global demand is expected to
average 101.6 m b/d, representing growth of 1.3 mm b/d year-on-year. The balancing item,
which mysteriously vanished in the second half, will likely re-emerge in 2020 as industrial
buying in China and India resumes. Whereas 2018 saw a balancing item of 1.0 m b/d, we
prefer to be conservative in 2020 and are only modeling 200,000 b/d. That would result in
global demand averaging 101.8 m b/d.
The IEA expects US production will grow by 1.2 m b/d to 18.26 m b/d. Despite being more
conservative than the EIA, we still think this figure is too optimistic. Driven by the slowing
rig count and muted productivity trends we explained earlier, we believe the US total liquids
(including NGLs) will only grow by 900,000 b/d to 17.96 m b/d. The IEA expects the rest
of the non-OPEC world will grow by 900,000 b/d driven by Norway and Brazil. As we
explained, this underestimates base declines materially and we believe non-OPEC ex US
will only grow by 450,000 b/d to reach 43 m b/d. Given processing gains, biofuels and
OPEC NGLs (produced outside the OPEC quota system), we expect total non-OPEC
liquids production of 71.7 m b/d, leaving the call on OPEC crude at 30 m b/d. OPEC
produced 29.44 m b/d in December and has announced further cuts totaling approximately
400,000 b/d. This would leave global oil markets undersupplied in 2020 by nearly 1.0 m b/d.
If we are correct, inventories will decline materially throughout the year. As our readers
know, we use inventories as our “mile-marker” to tell us if we are on the right path. We
accurately predicted seasonally-adjusted inventories would decline sharply beginning in
early 2017 (at a time when few others agreed with us). We were correct and inventories fell
at their fastest pace on record throughout all of 2017 and the first six months of 2018. Since
then, the global oil markets have been buffeted by both Iranian-sanction confusion (see our
Q1 2019 letter) and trade war impacts. While we had expected inventories would keep
declining, they built relative to seasonal averages from June 2018 until August 2019. While
this has been disappointing, our models tell us the worst is now behind us and that inventories
will resume their declines relative to seasonal averages, as we progress through 2020.
-------------------------------------
All of you should listen to Core Labs Q4 conference call. https://www.corelab.com/investors/webcast
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group