Energy Prospectus

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 14.4 million barrels last week, maintaining a total U.S. commercial crude inventory of 482.6 million barrels. The commercial crude inventory remains at the upper limit of the average range for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories jumped by 9.3 million barrels in the week ending October 28. API also reported gasoline supplies decreased by 3.6 million barrels and distillate inventories dropped by 3.1 million barrels. For the same period, analysts had estimated a decrease of 1.1 million barrels in crude inventories, along with a drop of 1.9 barrels in gasoline supplies and a decrease of 1.9 million barrels of distillates as well.

Total gasoline inventories dropped by 2.2 million barrels last week, according to the EIA, and remain well above the upper limit of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged 9.1 million barrels a day for the past four weeks, down by 1.2% compared with the same period a year ago.

Distillate inventories decreased by 1.8 million barrels last week but remain well above the upper limit of the average range for this time of year. Distillate product supplied averaged about 4.1 million barrels a day over the past four weeks, up by 3.7% compared with the same period last year. Distillate production averaged about 4.7 million barrels a day last week, up about 200,000 compared with the prior week’s production.

For the past week, crude imports averaged 9 million barrels a day, up by 2 million barrels a day compared with the previous week. Refineries were running at 85.2% of capacity, with daily input averaging over 15.4 million barrels, about 104,000 barrels a day less than the previous week’s average. Refinery utilization remains low as maintenance and turnaround continue, and it is not unreasonable to think that the rise in imports indicates that crude is stacking up in advance of the end to the maintenance work.

If you take a look at the details in the EIA report ( http://www.eia.gov/dnav/pet/pet_sum_sndw_dcus_nus_w.htm ) you will see that the reason storage levels went up last week was all because of imports. This happens at the end of an active hurricane season.

EIA has been reporting U.S. oil production as flat (8.4 to 8.5 million barrels per day) since early July. As I have posted here dozens of times, EIA's weekly production numbers are "guesses" based on formulas. Since the active rig count bottomed in Q2, I suspect that production may be lower than they reported in Q3.

The EIA's own Drilling Productivity Report is still reporting declining U.S. production in the seven major producing regions.

I do think U.S. onshore production may increase slightly in Q4 because lots of public companies want to get their DUC wells completed so they get those reserves move to P1.

The size of the build today came as an unpleasant surprise to the oil and gas industry, with the average estimate pegging a build of just 1.6 MMBO for the week ended October 28. Things are likely to improve from here, however.

Refinery run rates fell 104 MBOPD as utilization rates fell 0.4% last week to 85.2% of total capacity. On top of seasonally low run rates, this week’s report showed higher imports also adding to reserves.

“I don’t think that imports will stay this high and runs will be increasing from here,” Scott Shelton, broker and commodities specialist with ICAP told Reuters. “This tells me that while this is an ugly report, it’s the worst we are going to see for the rest of the year.”

Stocks of finished products fell this week. Gasoline saw a 2.2 MMBO draw, twice what analysts anticipated. Distillate stockpiles, which include diesel and heating oil, fell 1.8 MMBO compared to an expected drop of 1.9 MMBO as well.

http://www.oilandgas360.com/largest-eve ... S_Campaign