Summary of Weekly Petroleum Data for the week ending January 19, 2024
U.S. crude oil refinery inputs averaged 15.3 million barrels per day during the week ending January 19, 2024, which was 1.4 million barrels per day less than the previous week’s average. < Weather related.
Refineries operated at 85.5% of their operable capacity last week.
Gasoline production decreased last week, averaging 8.3 million barrels per day.
Distillate fuel production decreased last week, averaging 4.5 million barrels per day.
U.S. crude oil imports averaged 5.6 million barrels per day last week, decreased by 1.8 million barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.5 million barrels per day, 5.3% more than the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 628 thousand barrels per day, and distillate fuel imports averaged 201 thousand barrels per day.
Inventories:
> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 9.2 million barrels from the previous week. At 420.7 million barrels, U.S. crude oil inventories are about 5% below the five year average for this time of year.
> Total motor gasoline inventories increased by 4.9 million barrels from last week and are about 1% above the five year average for this time of year. Finished gasoline inventories decreased, while blending components inventories increased last week.
> Distillate fuel inventories decreased by 1.4 million barrels last week and are about 4% below the five year average for this time of year.
> Propane/propylene inventories decreased by 8.4 million barrels from last week and are 4% above the five year average for this time of year. < This is very bullish for NGL prices, which is good news for Antero Resources (AR), EQT and RRC.
>> Total commercial petroleum inventories decreased by 22.3 million barrels last week. < Largest total weekly decline in many years.
Total products supplied over the last four-week period averaged 19.5 million barrels a day, up by 3.3% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.1 million barrels a day, up by 3.7% from the same period last year.
Distillate fuel product supplied averaged 3.4 million barrels a day over the past four weeks, down by 6.9% from the same period last year.
Jet fuel product supplied was up 1.6% compared with the same four-week period last year.
EIA Weekly Petroleum Report - Jan 24
EIA Weekly Petroleum Report - Jan 24
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: EIA Weekly Petroleum Report - Jan 24
Trading Economics:
"WTI crude futures rose to over $75 per barrel, nearing their highest level in a month driven by a larger-than-expected decline in US crude stockpiles, China's economic stimulus measures, and escalating geopolitical tensions. To support its fragile economic recovery, China's central bank announced it will reduce the amount of cash that banks are required to hold as reserves as of February 5. Meanwhile, the Energy Information Administration reported a significant withdrawal of 9.2 million barrels of crude oil from US stockpiles, exceeding market expectations of a 2.15 million barrel decline and marking the largest decrease in five months. Geopolitical tensions remained a concern, with a coalition led by the US and UK conducting strikes against Houthi fighters in Yemen, who have been responsible for multiple attacks on commercial shipping in the Red Sea. Additionally, the US carried out strikes on Iran-linked militia in Iraq, retaliating against an attack on an Iraqi air base that injured US forces."
"WTI crude futures rose to over $75 per barrel, nearing their highest level in a month driven by a larger-than-expected decline in US crude stockpiles, China's economic stimulus measures, and escalating geopolitical tensions. To support its fragile economic recovery, China's central bank announced it will reduce the amount of cash that banks are required to hold as reserves as of February 5. Meanwhile, the Energy Information Administration reported a significant withdrawal of 9.2 million barrels of crude oil from US stockpiles, exceeding market expectations of a 2.15 million barrel decline and marking the largest decrease in five months. Geopolitical tensions remained a concern, with a coalition led by the US and UK conducting strikes against Houthi fighters in Yemen, who have been responsible for multiple attacks on commercial shipping in the Red Sea. Additionally, the US carried out strikes on Iran-linked militia in Iraq, retaliating against an attack on an Iraqi air base that injured US forces."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: EIA Weekly Petroleum Report - Jan 24
Comments below are from HFI Research with my comments in blue.
Oil inventories are starting 2024 with a bang. Thanks to the cold blast last week, US oil inventories fell ~21.4 million bbls.
To further fuel the oil bulls, US commercial crude storage is starting off the year vastly different than last year.
> Relative to 2023, we are now ~28 million bbls below last year. In our latest forecast, we are showing US crude storage falling to ~66 million bbls versus last year and 3.5 million bbls versus 2022.
> Seasonally speaking, we normally see US crude storage build in Q1. This was evident when this occurred last year, and we spent the rest of the year trying to eliminate that surplus.
> With Q1 2024 likely to finish at a deficit and possibly below 2022 levels, it will be interesting to see what that means for 1) US crude exports and 2) where we finish the year. We know given the linefill additions since 2014, US commercial crude storage doesn't have the capability of falling below ~400 million bbls, so as we get close to that level, there's a good chance Brent-WTI spreads will collapse, and US crude exports will fall.
> Translating that to the impact on the global oil markets, US crude exports falling would imply tighter light sweet crude balances globally, which should translate to higher backwardation in Brent. As backwardation increases, commodity trading advisors (CTA) and quant funds alike will pile back into oil. And with positioning near record lows, this could be another tailwind for oil prices. < VERY BULLISH for WTI prices if U.S. crude oil inventories continue to decline.
But what about refined products?
Despite the bullish changes we are seeing in crude, the most common question we seem to get is on the change in products.
> Looking at gasoline, distillate, and jet fuel, you can see that 2024 is currently in line with the 5-year average, and above both 2022 and 2023.
> Breaking down this further, gasoline and jet fuel are where the surplus is, while distillate is below the 5-year average. < "Distillates" are primarily diesel and home heating oil. Both are refined from black oil; not the ultra-light oil from shale plays.
> In my view, the current surplus in both gasoline and jet fuel is not of big concern.
> Colder than normal weather influences mobility-related fuels like gasoline and jet fuel. Normalized weather will improve demand figures.
> Seasonality explains most of the builds as year-end tax games being played by refineries.
> Refining margins remain healthy implying that the market sees through the gimmicks going on.
As a result, we wouldn't be quick to judge and assume that demand is far weaker than expected. We think both the seasonality and weather have played a crucial role in boosting product storage higher. This will normalize soon.
More importantly, look ahead...
Fundamentally speaking, readers should look ahead. We see three meaningful variables that will determine the fate of the oil market going forward.
> China's economy.
> US shale oil production.
> OPEC+ production compliance.
For China, the stock market has been the best sentiment indicator, and looking at the Hang Seng, it's back near the lows we saw in 2022.
In my view, this best illustrates what's going on in the Chinese economy. With the Chinese government now fixated on boosting the economy via stimulus, it will be important to see how the stock market reacts. For oil bulls, a recovering Chinese economy will be an important part of the 2024 demand thesis. While the expectation of growth is limited (~600k b/d), any upside surprise will be welcomed news both for the physical market and financial sentiment.
On the US shale side, the current drop in US oil production is temporary thanks to the well freeze-offs. But even if we exclude this factor, we saw US oil production decline in Q1 to 12.9 million b/d.
Post-freeze-off, we see US oil production recovering back to ~13.1 million b/d before gradually falling into the end of March. It will take a while before production picks back up to ~13.3 million b/d (July/August). When the consensus sees what we are seeing, sentiment will start to change about the idea that OPEC+ is losing control of the oil market. < IMO this is very important. The current "False Paradigm" by most investors is that U.S. shale oil production has limitless upside. There is also a belief that if Trump wins the election, his "Drill Baby Drill" policies will send U.S. oil production up fast in 2025 and cause oil prices to decline. Just remember that Trump cannot change the geology. The Permian Basin is the only major U.S. basin with production upside and it is probably going to peak in 2025.
Finally, OPEC+ compliance in Q1 is going to be better than expected.
With crude exports lower by ~800k b/d to start 2024, we think OPEC+ is committed to pushing Q1 balances to the deficit. With sentiment and positioning near all-time lows, we think the consensus remains skeptical about OPEC+ compliance. This will be resolved with time, and Q1 balances starting the year at a deficit is a good start.
Too Bearish...
As oil continues to climb the wall of worries, the consensus remains far too bearish. We think the combination of US shale and OPEC+ production disappointing to the downside will further improve Q1 balances. In addition, with US crude storage falling to start the year and increasing its deficit versus 2023 by mid-February, the market will start to pay attention. Fundamentally speaking, the oil market is moving in the right direction, so all that's left is for the results to become obvious, and sentiment to change.
----------------------------------------
MY TAKE: The risk for oil prices is to the upside. From March 1 to June 30 global demand for oil will increase by more than 2 million bpd and probably more than 3 million bpd unless there is a real global recession. This world runs on oil, and nothing is going to change that fact.
Oil inventories are starting 2024 with a bang. Thanks to the cold blast last week, US oil inventories fell ~21.4 million bbls.
To further fuel the oil bulls, US commercial crude storage is starting off the year vastly different than last year.
> Relative to 2023, we are now ~28 million bbls below last year. In our latest forecast, we are showing US crude storage falling to ~66 million bbls versus last year and 3.5 million bbls versus 2022.
> Seasonally speaking, we normally see US crude storage build in Q1. This was evident when this occurred last year, and we spent the rest of the year trying to eliminate that surplus.
> With Q1 2024 likely to finish at a deficit and possibly below 2022 levels, it will be interesting to see what that means for 1) US crude exports and 2) where we finish the year. We know given the linefill additions since 2014, US commercial crude storage doesn't have the capability of falling below ~400 million bbls, so as we get close to that level, there's a good chance Brent-WTI spreads will collapse, and US crude exports will fall.
> Translating that to the impact on the global oil markets, US crude exports falling would imply tighter light sweet crude balances globally, which should translate to higher backwardation in Brent. As backwardation increases, commodity trading advisors (CTA) and quant funds alike will pile back into oil. And with positioning near record lows, this could be another tailwind for oil prices. < VERY BULLISH for WTI prices if U.S. crude oil inventories continue to decline.
But what about refined products?
Despite the bullish changes we are seeing in crude, the most common question we seem to get is on the change in products.
> Looking at gasoline, distillate, and jet fuel, you can see that 2024 is currently in line with the 5-year average, and above both 2022 and 2023.
> Breaking down this further, gasoline and jet fuel are where the surplus is, while distillate is below the 5-year average. < "Distillates" are primarily diesel and home heating oil. Both are refined from black oil; not the ultra-light oil from shale plays.
> In my view, the current surplus in both gasoline and jet fuel is not of big concern.
> Colder than normal weather influences mobility-related fuels like gasoline and jet fuel. Normalized weather will improve demand figures.
> Seasonality explains most of the builds as year-end tax games being played by refineries.
> Refining margins remain healthy implying that the market sees through the gimmicks going on.
As a result, we wouldn't be quick to judge and assume that demand is far weaker than expected. We think both the seasonality and weather have played a crucial role in boosting product storage higher. This will normalize soon.
More importantly, look ahead...
Fundamentally speaking, readers should look ahead. We see three meaningful variables that will determine the fate of the oil market going forward.
> China's economy.
> US shale oil production.
> OPEC+ production compliance.
For China, the stock market has been the best sentiment indicator, and looking at the Hang Seng, it's back near the lows we saw in 2022.
In my view, this best illustrates what's going on in the Chinese economy. With the Chinese government now fixated on boosting the economy via stimulus, it will be important to see how the stock market reacts. For oil bulls, a recovering Chinese economy will be an important part of the 2024 demand thesis. While the expectation of growth is limited (~600k b/d), any upside surprise will be welcomed news both for the physical market and financial sentiment.
On the US shale side, the current drop in US oil production is temporary thanks to the well freeze-offs. But even if we exclude this factor, we saw US oil production decline in Q1 to 12.9 million b/d.
Post-freeze-off, we see US oil production recovering back to ~13.1 million b/d before gradually falling into the end of March. It will take a while before production picks back up to ~13.3 million b/d (July/August). When the consensus sees what we are seeing, sentiment will start to change about the idea that OPEC+ is losing control of the oil market. < IMO this is very important. The current "False Paradigm" by most investors is that U.S. shale oil production has limitless upside. There is also a belief that if Trump wins the election, his "Drill Baby Drill" policies will send U.S. oil production up fast in 2025 and cause oil prices to decline. Just remember that Trump cannot change the geology. The Permian Basin is the only major U.S. basin with production upside and it is probably going to peak in 2025.
Finally, OPEC+ compliance in Q1 is going to be better than expected.
With crude exports lower by ~800k b/d to start 2024, we think OPEC+ is committed to pushing Q1 balances to the deficit. With sentiment and positioning near all-time lows, we think the consensus remains skeptical about OPEC+ compliance. This will be resolved with time, and Q1 balances starting the year at a deficit is a good start.
Too Bearish...
As oil continues to climb the wall of worries, the consensus remains far too bearish. We think the combination of US shale and OPEC+ production disappointing to the downside will further improve Q1 balances. In addition, with US crude storage falling to start the year and increasing its deficit versus 2023 by mid-February, the market will start to pay attention. Fundamentally speaking, the oil market is moving in the right direction, so all that's left is for the results to become obvious, and sentiment to change.
----------------------------------------
MY TAKE: The risk for oil prices is to the upside. From March 1 to June 30 global demand for oil will increase by more than 2 million bpd and probably more than 3 million bpd unless there is a real global recession. This world runs on oil, and nothing is going to change that fact.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group