According to the EIA's WPSR, there was a drop in commercial crude inventories of 3.7 MMb/d last week, but most key volumes suggest we should have seen inventories rise. After Hurricane Beryl hit on July 8, production has remained at its recent peak of 13.3 MMb/d, but refinery demand has been noticeably weaker, falling 700 Mb/d over the past two weeks, while net imports are relatively unchanged. This net drop in demand would usually signal a stock build, except that the unaccounted-for volume is at negative 530 Mb/d, likely meaning either supply is overstated, demand is understated (usually due to higher-than-reported exports), or a combination of the two. Given the recent storm, it seems likely that supply has been overstated, possibly due to unidentified temporary production declines along the Gulf Coast. Additionally, it seems odd that exports have been uncharacteristically stable over the past two weeks, when you’d expect them to fluctuate more in response to the storm, supporting the notion that export figures may also be inaccurate.
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The Rise and Fall of Crude Supply - Shale Crude Production, Inventories and Imports
It looks like a combination of shale crude oil production and inventory drawdowns have been backing out crude oil imports over the past two months. Gulf Coast refineries are leading the way to crank up utilization, increase diesel exports and pull crude oil inventories down from the stratosphere. A lot of this activity seems to be bypassing Cushing. Meanwhile the Gulf Coast is at the center of two big events this week – a tropical storm and a huge refinery fire. Today we continue our analysis of crude inventories.
What's Your Name - Explaining the EIA's Huge Unaccounted Crude Oil Imbalances
The numbers don’t add up. Literally. The most closely watched energy statistics in the world have a problem, and it’s been getting worse over the past two years. We’re talking about EIA’s U.S. crude oil supply, demand and inventory balances, which are published each week and then trued up about 60 days later in monthly data. The problem is that the balances don’t balance. EIA uses a plug number alternatively called “adjustment” or “unaccounted for” to force supply and demand to equate. That would not be an issue if the plug number was small and flipped frequently from positive to negative, likely due to timing inconsistencies with the input data. But that’s not the case. The number is mostly positive, meaning more demand than supply. And the difference can be mammoth: last week it was 2.3 MMb/d, or 18.4% of U.S. crude production. It seems like barrels are somehow materializing out of nowhere. But now we know where, because EIA just finished a 90-day study of the crude imbalance that reveals the sources of the problem and what it is going to take to fix it. In today’s RBN blog, we will delve into what has been causing the problem, what it means for interpreting EIA statistics, and what EIA is doing to address the issues.
One Piece at a Time - U.S. Crude Oil Supply/Demand Balances, Inventories and Pricing
Last week, crude oil prices dropped below $50/bbl, in part due to continued increases in U.S. crude oil inventories, and fell further over the next few days. Then yesterday, prices perked up by $1.14 to $48.86/bbl; again one of the factors was the weekly inventory number from the Energy Information Administration which showed inventories down by a fraction of a percentage point for the week. The market seems to react spontaneously to changes in that crude-stocks statistic. Up is bearish, down is bullish. These days even a very modest decline in inventories is bullish. But serious analysis requires a more detailed, more nuanced understanding of why crude oil inventories behave as they do. Were inventories driven up by higher production or lower refinery runs? By higher imports? By lower exports? The reasons behind the inventory change are more important than the change itself. Today we continue our series on the modeling of U.S. crude oil supply and demand, and the sourcing of input data used in those calculations.
