Energy Prospectus

Summary of Weekly Petroleum Data for the week ending May 15, 2020

U.S. crude oil refinery inputs averaged 12.9 million barrels per day during the week ending May 15, 2020 which was 0.5 million barrels per day more than the previous week’s average.
Refineries operated at 69.4% of their operable capacity last week. < Refiner run rate needs to ramp up to at least 90% to meet summer demand for gasoline.
Gasoline production decreased last week, averaging 7.2 million barrels per day.
Distillate fuel production decreased last week, averaging 4.8 million barrels per day.

U.S. crude oil imports averaged 5.2 million barrels per day last week, down by 194,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 5.4 million barrels per day, 24.6% less than the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 526,000 barrels per day, and distillate fuel imports averaged 322,000 barrels per day.

> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 5.0 million barrels from the previous week. At 526.5 million barrels, U.S. crude oil inventories are about 10% above the five year average for this time of year. < Crude oil decline is bullish, but refined product builds are bearish.
> Total motor gasoline inventories increased by 2.8 million barrels last week and are about 10% 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 3.8 million barrels last week and are about 19% above the five year average for this time of year.
> Propane/propylene inventories increased by 1.1 million barrels last week and are about 14% above the five year average for this time of year.
>> Total commercial petroleum inventories increased last week by 5.0 million barrels last week.

Total products supplied over the last four-week period averaged 16.1 million barrels a day, down by 19.0% from the same period last year. Over the past four weeks, motor gasoline product
supplied averaged 6.7 million barrels a day, down by 29.1% from the same period last year.
Distillate fuel product supplied averaged 3.4 million barrels a day over the past four weeks, down by 13.8% from the same period last year. Jet fuel product supplied was down 66.9%
compared with the same four-week period last year.

Aegis Energy:
EIA reported a draw of -4982 MBbls in U.S. crude-oil inventories for the week ending 5/15/2020. This was larger than the average estimate of 1808 MBbls as reported by Bloomberg.

Prices were down five minutes following the announcement, to $33.14, from $33.38 just before 9:30am.

Inventories for the US are now at a surplus of 54.459 MBbls to last year and a surplus of 49.66 MBbls to the five-year average.

By John Kemp
LONDON, May 20 (Reuters) - Physical crude markets are signalling a rapid shift from an enormous over-supply at the height of the coronavirus lockdowns in April towards an expected under-supply in the second half of the year.

Dated Brent's six-week calendar spread has shrunk to a contango of less than 70 cents per barrel from more than $6 per barrel in the first week of April.

Calendar spreads correlate closely with the expected production-consumption balance and are usually a more accurate indicator than spot prices alone.

Dated Brent is based on the cost of buying and selling physical cargoes from the Brent, Forties, Oseberg, Ekofisk and Troll field-systems in the North Sea.

Unlike futures contracts, trading is very near-term and dominated by producers, refiners, physical merchants and large financial institutions, with few hedge funds and no retail investors.

Because dated Brent is a complex of seaborne crudes, it avoids the storage constraints that have distorted inland WTI prices recently.

The shrinking calendar spread is a strong signal the physical market has become much better balanced over the last six weeks.

The Organization of the Petroleum Exporting Countries and its allies have cut crude exports sharply while refineries’ consumption has started to rise as lockdowns ease.

Fears about running out of crude storage at tank farms on land and in vessels off the coast have disappeared.

Dated Brent's six-week calendar spread is now in the 20th percentile for all trading days in the last decade up from the 1st percentile early last month.

In a longer term perspective, the crude market remains weak but no longer exceptionally so. Current spreads are consistent with high but stable or falling inventories, a sharp turn around from surging stocks a month ago.

Like the production-consumption balance, spreads tend to be cyclical, and are likely to tighten further, provided the economy continues to recover and oil producers remain disciplined.