Energy Prospectus

Summary of Weekly Petroleum Data for the week ending July 15, 2022

U.S. crude oil refinery inputs averaged 16.3 million barrels per day during the week ending July 15, 2022 which was 321,000 barrels per day less than the previous week’s average. Refineries operated at 93.7% of their operable capacity last week.
Gasoline production increased last week, averaging 9.4 million barrels per day.
Distillate fuel production decreased last week, averaging 5.0 million barrels per day.

U.S. crude oil imports averaged 6.5 million barrels per day last week, decreased by 0.2 million barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.5 million barrels per day, 1.7% more than the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 865,000 barrels per day, and distillate fuel imports averaged 122,000 barrels per day.

Focus below on how far inventories are below the 5-year average. Distillate fuel (diesel) is my major concern because rationing of diesel would be a significant blow to the American economy.

> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.4 million barrels from the previous week. At 426.6 million barrels, U.S. crude oil inventories are about 6% below the five year average for this time of year. Keep in mind that we are draining the SPR by about a million bpd.
> Total motor gasoline inventories increased by 3.5 million barrels last week and are about 3% below the five year average for this time of year. Both finished gasoline inventories and blending components inventories increased last week.
> Distillate fuel inventories decreased by 1.3 million barrels last week and are about 23% below the five year average for this time of year. > Propane/propylene inventories increased by 1.4 million barrels last week and are about 16% below the five year average for this time of year.
>> Total commercial petroleum inventories increased by 1.1 million barrels last week.

Total products supplied over the last four-week period averaged 20.1 million barrels a day, down by 2.6% from the same period last year.
Over the past four weeks, motor gasoline product supplied averaged 8.7 million barrels a day, down by 7.6% from the same period last year.
Distillate fuel product supplied averaged 3.8 million barrels a day over the past four weeks, down by 0.6% from the same period last year.
Jet fuel product supplied was up 9% compared with the same four-week period last year. < Jet fuel demand is the only refined product that is not at or above pre-pandemic demand.

Note from Raymond James Equity Research

This week's petroleum inventories update was mixed relative to consensus. “Big Three” petroleum inventories (crude, gasoline, distillates) fell by 3.2 MMBbls, versus consensus estimates calling for a build of 4.6 MMBbls. Turning to crude, total inventories drew by 5.4 MMBbls, versus consensus calling for a build of 2 MMBbls and a normal seasonal draw of 2.6 MMBbls. The SPR released 5 MMbls during the week, down from 6.9 MMbls the prior week, falling short of its 1 Mbbl/d target volume. Refinery utilization fell to 93.7% from 94.9% the prior week. Total petroleum imports were 8.7 MMBbls per day, down from 8.9 MMBbls per day.

The wild ride has continued with crude back to recent highs with WTI cresting $104/bbl. Part of the comeback came from the Fed, where news of a 100 basis point rate hike had investors flustered. As of now, that is looking more unlikely, with another 75 basis point hike the most likely scenario. Also, President Biden visited Saudi Arabia, where, among other things, he discussed energy security with the OPEC member nation. The President was unable to secure a promise of increased production but indicated he was hopeful we would see more out of the country in the coming weeks. The supply demand picture for oil remains tight, keeping prices up despite the various demand related concerns weighing on the markets. The twelve-month futures strip is now standing at $91.59 and Brent at $95.23.

No Quick Fix for the Global Oil Shortage created by the Climate Change Wackos

Read carefully: https://www.zerohedge.com/commodities/s ... ally-short

Summer spoke with people familiar with Saudi oil flows and said the Kingdom would struggle to produce another half million bpd at 11 million bpd. And it would be tough even to get production at 12 million bpd. They gave a handful of reasons why bringing on spare capacity would be a troubling task, such as maintenance requirements, declining production at some oil-producing fields, and technical issues involving pressure levels. It was also noted that when state oil company Aramco reduced drilling during the early days of the virus pandemic because of plunging global demand, boosting output rapidly by injecting wells with fluids to increase production could cause longer-term damage.

The revelation that the Kingdom nears the long-term upper limit should not come as a surprise to many, as French President Emmanuel Macron stated at the recent G7 meeting that spare production capacity was very limited for the Saudis and UAE.

What comes next is an OPEC+ meeting scheduled for Aug. 3. The group has called for incremental, monthly increases in output. However, some members have expressed that they cannot meet their share of production.

The world is structurally short production capacity at a time demand growth remains robust. Also, Russian energy supplies are declining due to the impact of the Ukraine invasion. JPM's commodities team recently warned crude Brent prices could rocket higher if Russian production is slashed, with forecasts as high as $380 in a worst-case scenario.

Brent prices remain over $105 on Wednesday morning as the market has no clear sight of where additional supply will come from to balance demand -- maybe only a recession/depression is needed to crush consumer demand.

To sum up, Biden should've stayed home last weekend and enjoyed riding his bike and eating ice cream in Rehoboth Beach than trying to optically please Americans that he's solving the energy crisis that appears to be a multi-year crisis.