Energy Prospectus

This is VERY BULLISH because despite massive draws from the SPR, U.S. commercial crude oil inventories keep falling and are at the bottom of the 5-year range. Raymond James forecast is that total OECD inventories will draw down to less than 25 Days of Consumption during 2023, which (based on the historical relationship) should push WTI up to $135/bbl in the summer of 2023.

Summary of Weekly Petroleum Data for the week ending November 25, 2022

U.S. crude oil refinery inputs averaged 16.6 million barrels per day during the week ending November 25, 2022 which was 228,000 barrels per day more than the previous week’s average.
Refineries operated at 95.2% of their operable capacity last week.
Gasoline production increased last week, averaging 9.4 million barrels per day.
Distillate fuel production increased last week, averaging 5.3 million barrels per day.

U.S. crude oil imports averaged 6.0 million barrels per day last week, decreased by 1.0 million barrels per day from the previous week.
Over the past four weeks, crude oil imports averaged about 6.3 million barrels per day, 0.9% less than the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 535,000 barrels per day, and distillate fuel imports averaged 152,000 barrels per day.

Focus on how low inventories are compared to the 5-year average

> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 12.6 million barrels from the previous week. At 419.1 million barrels, U.S. crude oil inventories are about 8% below the five year average for this time of year.
> Total motor gasoline inventories increased by 2.8 million barrels from last week and are about 4% below the five year average for this time of year. Both Finished gasoline and blending components inventories increased last week.
> Distillate fuel inventories increased by 3.5 million barrels last week and are about 11% below the five year average for this time of year.
> Propane/propylene inventories increased by 1.6 million barrels from last week and are 13% above the five year average for this time of year.
>> Total commercial petroleum inventories decreased by 8.8 million barrels last week.

Total products supplied over the last four-week period averaged 20.5 million barrels a day, down by 1.1% from the same period last year.
Over the past four weeks, motor gasoline product supplied averaged 8.6 million barrels a day, down by 6.1% from the same period last year.
Distillate fuel product supplied averaged 3.9 million barrels a day over the past four weeks, down by 9.9% from the same period last year.
Jet fuel product supplied was up 3.7% compared with the same four-week period last year.

Huge draw and Wall Street yawns!

Trading Economics:
WTI crude futures jumped more than 3% to fresh daily highs at around $81 per barrel on Wednesday, supported by a bigger-than-expected drop in US crude inventories, while investors kept an eye on the upcoming OPEC+ meeting. The latest EIA data showed that crude oil stockpiles dropped by about 12.6 million barrels in the week ended November 25, the most since the week ended June 21, 2019, and well above market expectations of a 2.758-million-barrel decline. Meanwhile, OPEC and its allies, including Russia, are expected to keep their output quotes unchanged at their next meeting on December 4. However, there has yet to be a consensus, with further production cuts still on the table. The US benchmark lost more than 6% in November amid persistent concerns about a potential global recession-driven demand downturn.

The Wall Street Gang is always more focused on the overall market, which is more concerned about inflation and what the Fed will do next.

When the SPR draws end (s/b soon), commercial crude oil inventories will continue to fall. After OPEC+ confirms next week that they are NOT GOING TO INCREASE SUPPLY, the price of oil should march steady up and over $100/barrel. Holiday travel will burn up a lot of transportation fuels and cold waves heading to the eastern U.S. will burn up a lot of heating oil.

China will eventually lift all the Covid lockdowns, which are doing anything to reduce Covid cases anyway. Does anyone think locking millions of people in tight quarters is going to control a virus?