Energy Prospectus

Summary of Weekly Petroleum Data for the week ending July 24, 2020

U.S. crude oil refinery inputs averaged 14.6 million barrels per day during the week ending July 24, 2020 which was 389,000 barrels per day more than the previous week’s average. Refineries
operated at 79.5% of their operable capacity last week.
Gasoline production increased last week, averaging 9.2 million barrels per day.
Distillate fuel production increased last week, averaging 4.8 million barrels per day.

U.S. crude oil imports averaged 5.1 million barrels per day last week, decreased by 0.8 million barrels per day from the previous week. < Weather related decline.
Over the past four weeks, crude oil imports averaged about 6.0 million barrels per day, 13.6% less than the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 924,000 barrels per day, and distillate fuel imports averaged 148,000 barrels per day.

> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 10.6 million barrels from the previous week. At 526.0 million barrels, U.S. crude
oil inventories are about 17% above the five year average for this time of year.
> Total motor gasoline inventories increased by 0.7 million barrels last week and are about 8% 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 0.5 million barrels last week and are about 26% above the five year average for this time of year.
> Propane/propylene inventories increased by 2.0 million barrels last week and are about 12% above the five year average for this time of year.
>>Total commercial petroleum inventories decreased last week by 6.5 million barrels last week.

Total products supplied over the last four-week period averaged 18.3 million barrels a day, down by 13.1% from the same period last year. Over the past four weeks, motor gasoline product
supplied averaged 8.7 million barrels a day, down by 9.0% from the same period last year.
Distillate fuel product supplied averaged 3.4 million barrels a day more than the past four weeks, down by 11.1% from the same period last year.
Jet fuel product supplied was down 42.1% compared with the same four-week period last year
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When the detailed report comes out look at oil and refined products days of supply. It will be nice to see refinery utilization finally get over 80% next week.

Aegis Energy: "EIA reported a draw of -10,611,000 Bbls in U.S. crude-oil inventories for the week ending 7/24/2020. This was larger than the average estimate of -3,400 MBbls as reported by Bloomberg. Prices were up five minutes following the announcement, to $41.39, from $41.31 just before 9:30am. Inventories for the US are now at a surplus of 80.928 MBbls to last year and a surplus of 75.66 MBbls to the five-year average."

(Bloomberg) -- Oil was propped up by the biggest decline in U.S. crude stockpiles this year, signaling a bright spot in a market weakened by the Covid-19 pandemic.

Futures in New York rose as much as 1.3%. Domestic oil inventories tumbled by more than 10 million barrels last week, the biggest decline since December, according to an Energy Information Administration report. Oil imports declined, with shipments from Saudi Arabia falling to the lowest since April.

“Imports were down pretty big, which on the crude side, explains most of the change week-over-week,” said Matt Sallee, portfolio manager at Tortoise, which manages about $11 billion in energy-related assets. The Saudi crude overhang “seems to be getting behind us.”

Still, the recovery in West Texas Intermediate crude futures has stalled near $40 a barrel with the pandemic flaring up again around the world, keeping demand depressed. Even though stockpiles in the U.S. are shrinking, production has remained stubbornly high above 11 million barrels a day. Further looming over the market, the OPEC+ alliance is preparing to pull back from unprecedented production cuts within days.

“It does appear some of the U.S. producers are bringing back production, so with oil at 40 bucks, we do face a bit of a headwind,” said Sallee. Prices will likely rise from here, “but it will be at a very measured pace.”

Meanwhile, investors are also awaiting the conclusion of a Federal Reserve policy meeting on Wednesday, with the U.S. central bank expected to signal it will keep interest rates near zero as the coronavirus continues to spread.

The futures curve is another indication of continued weakness. The U.S. crude benchmark’s three-month timespread was 70 cents a barrel in contango -- where near-dated contracts are cheaper than later-dated ones -- compared with 31 cents at the end of June.

As the market recovery teeters, the world’s largest independent oil storage company, Royal Vopak NV, said its tanks are filling and almost all space is booked. While not necessarily a repeat of the scramble for storage that pushed prices below zero earlier in the year, it’s a reminder of the level of uncertainty that persists in the oil market.

“The pandemic is the elephant room,” said Michael Lynch, president of Strategic Energy & Economic Research. “It really kind of overshadows everything at this point.”

Raymond James

This week's petroleum inventories update was bullish relative to consensus. "Big Three" petroleum inventories (crude, gasoline, distillates — including SPR) drew by 9.5 MMBbls, versus consensus estimates calling for a draw of 3.2 MMBbls and a seasonal draw of 1.0 MMBbls. Turning to crude, total inventories fell 10.6 MMBbls (including the SPR), versus consensus calling for a draw of 1.2 MMBbls and a normal seasonal draw of 0.8 MMBbls. Refinery utilization rose to 79.5% from 77.9% last week. Total petroleum imports were 7.3 MMBbls per day, down from last week’s 7.9 MMBbls per day. Total petroleum product demand increased 8.2% after last week’s 4.5% decrease. On a four-week moving average basis, there is a 13.2% y/y decrease in total demand.

Throughout June and July, WTI prices have been in a trading range around the $40/Bbl level amid mixed signals on the pace of global economic recovery. Price-driven production shut-ins in the U.S. and elsewhere are minimal at this point, while indications from the recent OPEC+ meeting suggest the group will be disciplined in bringing production back online. COVID-related disruptions in transportation and economic activity have largely subsided, but as shown by headlines over the past month from around the world, there are more instances of governments reversing the reopening process via “lockdowns 2.0”, as well as stricter travel rules. Having been tracking economic reopening policies in 85 countries, here is the key data point: of the 4.37 billion people who have been under a lockdown at some point since January, 3.55 billion (81%) live in jurisdictions that have concluded their reopening, which we define as everything up to and including all retail and restaurants dine-in. This is down from the peak level of 89% in early July. As problematic as the current COVID headlines are, we are more concerned about impact on demand from a “second wave” this coming winter in the Northern Hemisphere. The 12-month futures strip is at $42.19/Bbl for WTI and $45.08/Bbl for Brent, exhibiting a nearly flat profile.