Energy Prospectus

Summary of Weekly Petroleum Data for the week ending June 28, 2024

U.S. crude oil refinery inputs averaged 16.8 million barrels per day during the week ending June 28, 2024, which was 260 thousand barrels per day more than the previous week’s average.
Refineries operated at 93.5% of their operable capacity last week.
Gasoline production increased last week, averaging 10.1 million barrels per day.
Distillate fuel production increased last week, averaging 5.1 million barrels per day.

U.S. crude oil imports averaged 6.5 million barrels per day last week, decreased by 65 thousand barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 7.1 million barrels per day, 9.0% more than the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 851 thousand barrels per day, and distillate fuel imports averaged 94 thousand barrels per day.

Inventories
> U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 12.2 million barrels from the previous week. At 448.5 million barrels, U.S. crude oil inventories are about 4% below the five year average for this time of year.
> Total motor gasoline inventories decreased by 2.2 million barrels from last week and are 1% below the five year average for this time of year. Both finished gasoline and blending components inventories decreased last week.
\> Distillate fuel inventories decreased by 1.5 million barrels last week and are about 10% below the five year average for this time of year.
> Propane/propylene inventories increased by 2.3 million barrels from last week and are 11% above the five year average for this time of year.
>> Total commercial petroleum inventories decreased by 13.0 million barrels last week.

Total products supplied over the last four-week period averaged 20.5 million barrels a day, down by 1.0% from the same period last year.
Over the past four weeks, motor gasoline product supplied averaged 9.2 million barrels a day, down by 1.7% from the same period last year.
Distillate fuel product supplied averaged 3.7 million barrels a day over the past four weeks, up by 1.4% from the same period last year.
Jet fuel product supplied was down 1.3% compared with the same four-week period last year.
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MY TAKE:
This is a very bullish report and it should be the first of several more reports that show declining BIG 3 (oil, gasoline & distillates) inventories. July is a high demand month for transportation fuels. Also, looks like U.S. oil production has flatlined. There aren't enough active drilling rigs to increase U.S. oil or gas production.
WTI price increased for ~30 minutes after the report came out, then declined rapidly as the LONG hit the SELL button. Traders let the price fall and then when it bottomed they hit the BUY button. Lots of the trading in the oil futures market is computers doing the trading.

Trading Economics:
WTI crude oil futures were above $83 per barrel on Wednesday, holding close to the two-month high of $83.4 touched on Monday amid lingering concerns about lower supply.
> Today's latest report from the EIA showed that crude oil inventories in the US plunged by 12.2 million barrels in the last week of June, the biggest decline in one year, and sharply above market expectations of a 1 million barrel drop, but in line with the draw reflected by the API.
> Supply concerns were also present amid the threat that hurricanes in the Gulf of Mexico could threaten extraction activity for key producers.
> On top of that, prolonged conflict between Israel and Hamas in Gaza maintained the risk premium on energy futures.
> Keeping sentiment in check, Reuters data showed that OPEC's oil output rose for a second straight month in June due to increased production from Nigeria and Iran, countering voluntary supply cuts by other members and the broader OPEC+ alliance.

HFI Research:

"EIA reported a very bullish oil storage report today, but the key question on everyone's mind is, "How sustainable is this draw?"

My take on the incoming inventory draw is that this week's large crude draw was impacted by the timing of crude exports/imports (we detailed that in our weekly crude storage report). And for the following week, the crude draw is materially lower. < HFI forecast is a crude oil draw of 2.77 million barrels for the week ending July 5.

With that said, we do expect crude inventories to keep declining to the end of August. If our projections are correct, we expect US commercial crude inventory to fall to low ~400 million bbls. Barring any surprise US SPR releases, the market is already anticipating this.

For readers equipped with this knowledge, please do not be surprised when I say that some of the recent price moves are already pricing in this incoming crude draw.

As a result, we are unlikely to break the pivotal resistance level at $85/bbl without a meaningful move in crack spreads (higher). The implication for this is that WTI is more likely to be skewed to the downside in the coming weeks than going up. Please be positioned accordingly.
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MY TAKE:
Oil Traders are also watching the shooting war between Hezbollah and Israel.
An all-out war with Iran's #1 proxy would be bad for Israel. Hezbollah is a much stronger force than Hamas.
IMO the U.S. should be enforcing the sanctions against Iran, but that will not happen while Biden is still the Dems candidate.