Crude prices climbed by nearly $5/bbl last week following the devastating war in Israel. Domestically, while crude production remained at an all-time high last week, the rest of the industry was on the move. Refinery net input ended its four-week slide and rose 200 Mb/d as at least some facilities in PADD 3 came back online after maintenance. Imports fell to the bottom of what we can call their “normal” weekly range at 5.9 MMb/d, while exports more than made up for the previous week’s dive, soaring over 2.2 MMb/d to 5.3 MMb/d. The difference between these two (5.9 MMb/d minus 5.3 MMb/d) means that net imports were only 640 Mb/d, the second-tightest margin on record, and makes one wonder if (or when) we will see a week of net exports. This jump in demand led to a 4.5-MMbbl draw on crude inventories.
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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.
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.
Cruel Summer? - Is the Crude Market Headed for an Ugly Replay of This Spring?
The crude oil market may be approaching another rough patch, with the trajectory of the COVID pandemic and OPEC+ again poised to inflict a double whammy on U.S. producers. For the past couple of months, refinery demand for crude has been rebounding as the U.S. has made tentative steps toward reopening. Over the same period, domestic production of oil declined and then flattened out, and now appears to be headed for a midsummer uptick as more shut-in wells are brought back online. But there’s potential trouble just ahead. The months-long imbalance between crude supply and demand boosted U.S. oil inventories in commercial storage to record-high levels over the past few weeks, with even more oil flowing into rented space in the Strategic Petroleum Reserve (SPR) salt caverns. Worse yet for producers, a resurgence of the coronavirus may put some parts of the U.S. back into semi-lockdown, and if that happens, refinery utilization could take a second tumble. That could push more crude into storage or onto supertankers for export, even as OPEC+ is talking about relaxing their production cuts. Today, we examine the trends that could be problematic for U.S. oil producers and refiners in the second half of 2020 and beyond.
