Oil Storage Report - April 29

[dan_s]

CRUDE OIL INVENTORY/’000 bbls (Week Ended 4/24/15)

Current: 490,912
Actual Build/(Withdrawal): 1,910
Economist Average Estimate: 2,782
Previous: 489,002

We should start seeing draws from storage in May as U.S. refiners ramp up gasoline production for the summer driving season.

[dan_s]

I have been telling people that Wall Street was reading WAY TO MUCH into the recent increase in crude oil inventory levels. #1 we have a lot more storage capacity and there is ZERO chance of running out of storage capacity. Below is a note that was posted to another board I follow. - Dan

Headline: US Crude oil inventories are 490million barrels - THE MOST IN 80 YEARS

What a horrible headline to read!! What a BEARISH headline!! But put into perspective:
> US consumption today is 19 million barrels a day ( and we still have to import over 7 million bbls per day to meet our needs)
> 80 years ago (1935-1940) US consumption was around 7.5million (based on my google searches).
> Therefore, US oil inventories today are 25.8 days of consumption (490 / 19).
> 80 years ago these inventories were 65.3 days of consumption (490 / 7.5).
So in your opinion, is the headline still all that bearish? Some might even view it as bullish with declining US production today; and OPEC's current spare capacity is the least its been in 80 years.

As I said at yesterday's luncheon in Houston, when you see big numbers used in anything about the energy sector you MUST put those numbers in context. This is an industry with a lot of VERY BIG NUMBERS and some people use those numbers to frighten investors. Today's "glut" of oil is heading to a "shortage" within a year. We are going to be very happy to have some extra oil in storage. - Dan

[dan_s]

Cushing oil stocks declined by 514,000 bbls to 61.69 MMbbls.
Refinery utilization was 91.3%, close to the prior week's utilization level.
The EIA did not change its estimate for Lower 48 oil production again, leaving its estimate at 8.861 MMbpd for the third consecutive week. This is 21,000 bpd lower than production four weeks ago. Lower crude oil imports compared to the prior week helped to ease oil surplus growth, contributing to a slight decrease in oil in storage at Cushing.

I believe U.S. crude oil production will drop to 8.5 million barrels per day by year-end. In my opinion, EIA's method of forecasting production is based on formulas that primarily use historical trends, therefore they are biased to the high side during this period of rapidly declining rig count. - Dan

[setliff]

the technicals say cl is moving into the mid sixties near term if the gain today holds.

[dan_s]

Speculators covering their shorts and seeing increasing demand just ahead is what is driving this. Several closes over $60 would make that a support level. This is actually happening two months earlier than I thought. My forecast models now assume Q3 average WTI of $60 and Q4 average WTI of $70 (adjusted for regional differentials and each companies' hedges).

Active rig count will keep falling until it is under 700 for U.S. and might go to under 50 for Canada. Active rig count will stay low all year, no matter what oil prices do. Oilfield service firms are under the most pressure. I talked to a very depressed Halliburton VP on Tuesday.

Global Hunter has a BUY on PTEN, which surprised me.

[setliff]

not only global, but g. sachs, scotia howard weil, and cowen all raised pten to buys after they reported last week. they are all thinking bottom has been set.

[dan_s]

I love PTEN, HP and PDS. However, I doubt we see any significant increase in drilling and completion activity until next year, no matter how high oil prices go. BUT the market is forward looking, so the stock may move up regardless.