Crude Oil

Crude Oil Market

Slightly positive news from Europe on Wednesday and a huge draw reported in the latest EIA weekly oil inventories report were enough to move oil prices higher and WTI one step closer to the triple digit price level. The large draw was viewed as modestly bullish since a good portion of the draw was likely related to end-of-the-year LIFO inventory adjustments. With few important comments or news snippets hitting the media airwaves over the next week or so (due to the holidays), many risk asset markets could experience a continuation of the short covering rally started a few days ago.

The ongoing story of Iran and the broader Middle East (including Iraq now that the U.S. military is gone) will continue to act a put in the oil market with exposure for price spikes at any time. The geopolitics of the region will once again be on the radar and will from time to time act as the main price driver for the oil complex. There are enough geopolitical events evolving in Iran, Iraq, Egypt, Syria, Kazakhstan and Nigeria to suggest that over the medium, term supply issues could emerge. The most active at the moment are the protests in a major oil city in Kazakhstan that could impact oil flow and exports from that area while a major Shell pipeline spill in Nigeria has cut production of a 200,000 bpd export flow.

Weekly EIA Oil Inventories Report

The inventory report showed a modest build in total stocks, an as-expected build in distillate inventories, along with a huge build in gasoline stocks as implied demand was higher while refinery utilization rates declined strongly on the week to 85.1% of capacity a decrease of 2.6% in refinery run rates. The data are summarized in the following table along with a comparison to last year and the five year average for the same week.

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Total commercial stocks of crude oil and refined products decreased strongly on the week by 18.2 million barrels. The year-over-year status of total commercial stocks of crude oil and refined products remains in a deficit position for the 38th week in a row. The year-over-year deficit widened to 41.3 million barrels while the overhang versus the five-year average for the same week came in around 5.1 million barrels.

Crude oil inventories decreased versus an expectation for a much smaller draw with a major decrease in PADD 3. With a decrease in stocks this week, the crude oil inventory status versus last year is still showing a wide deficit of around 17.1 million barrels while the surplus versus the five-year average for the same week narrowed to around 1.5 million barrels. PADD 2 stocks increased by 0.8 million barrels on the week while Cushing stocks declined by about 1 million barrels. Crude oil inventories in this region of the U.S. have been in a decline and are still at levels not seen since the middle of 2010 when the Brent/WTI price spread was trading at significantly lower levels. The price spread continues to trade in a trading range of between $9 to $11.50/bbl premium to Brent.

Distillate stocks decreased versus an expectation for a modest build. Heating oil/diesel stocks decreased by 2.4 million barrels as exports seemed to increase on the week. The year-over-year deficit widened to 21.6 million barrels while the five-year average deficit widened to about 4.3 million barrels.  With the economics and demand still likely to hold outside the U.S. and unless the upcoming winter heating season comes in much colder than any of the expectations, the current level of exports will likely continue.

Gasoline inventories decreased modestly on the week versus an expectation for a modest build. Total gasoline stocks decreased by about 0.4 million barrels on the week versus an expectation for a build of about 1.0 million barrels. The surplus versus last year came in at 1.2 million barrels while the surplus versus the five-year average for the same week narrowed to about 8.9 million barrels.

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Weekly Oil Inventories Report

The API data released yesterday evening showed across the board draws. The API reported a large draw in crude oil stocks versus an expectation for a modest decline in crude oil inventories of about 4.6 million barrels, as crude oil imports decreased and refinery run rates also decreased by 2.1%. The API reported basically small draw in gasoline stocks versus projections for a modest build and a larger-than-expected draw in distillate fuel inventories.

The market was expecting a modest draw in crude oil stocks and a modest build in gasoline with a small draw in distillate fuel inventories this week. The report is somewhat bullish for the entire complex.

It is difficult to differentiate whether the price gains overnight were from the inventory report, or from the falling U.S. dollar and positives out of Europe. The market remains hostage to the evolving situation in Europe that has been unfolding once again this week as discussed above with inventory data a secondary driver.

The more widely watched EIA data will be released this morning.  Whether or not the market will react to anything that comes out of the EIA this morning will be dependent on what revolves around Europe today. Finally keep in mind that the large variations from the expectations are likely related to the industry starting to adjust their inventories for LIFO accounting purposes.

Weekly Oil Inventories Reports

The API data yesterday showed across the board builds. The API reported a small build in crude oil stocks versus an expectation for a modest decline in crude oil inventories of about 0.5 million barrels as crude oil imports increased and refinery run rates also decreased by 1.4%. The API reported basically no change in gasoline stocks versus projections for a modest build and an expected build in distillate fuel inventories.

The market was expecting a modest draw in crude oil stocks and a modest build in gasoline and distillate fuel inventories this week. The report is somewhat bearish for the entire complex. The report has resulted in selling in the market overnight. The market remains hostage to the evolving situation in Europe that has been unfolding once again this week, with inventory data a secondary driver. The API reported a build of about 0.5 million barrels of crude oil with a 0.1 million barrel build in Cushing and a build of about 1 million barrels in PADD 2. This is bullish for the Brent/WTI price spread, which has been somewhat range bound since the middle of November. On the week, gasoline stocks were about unchanged while distillate fuel stocks built by about 1.2 million barrels.

The more widely watched EIA data will be released this morning.  Whether or not the market will react to anything that comes out of the EIA this morning will be dependent on what revolves around Europe today.

Oil remains mostly coupled to the direction of the USD and the euro and will remain in this pattern for the foreseeable future or until Europe moves into the background. At the moment all market participants are continuing to follow the tick by tick direction of equities and the U.S. dollar (driven by Europe), as they are both the primary price drivers for oil. Even with the fundamentals and geopolitics starting to impact price, it is the macro trade that dominates at the moment. As such this week’s oil inventory report could remain a secondary price driver at best and only impact price direction if the actual EIA data is noticeably outside of the range of market expectations for the report.

Weekly Oil Inventories Report: Builds in All Three Reported Commodities and Prices are Mixed‏

The Energy Information Administration (EIA) has issued its weekly oil inventories report for the week ending Friday, November 25, 2011.  Comparisons of the earlier and less-followed API report, projections for this week’s EIA report, and today’s EIA report are shown below.   This report is “bearish” as most inventories are generally more robust than projected.

    Weekly Oil Inventories Reports for the Week Ending Friday November 25, 2011

Million Barrels

API Report

Projections

EIA Report

Crude Oil

3.4

0.9

3.9

Gasoline

-0.2

1.0

0.2

Distillate

1.3

-1.0

5.5

Upon the EIA’s report release, light crude oil was trading $100.92 per barrel, up $1.10 from yesterday’s close for January, largely from tensions in the Middle East.  Natural gas for January was trading at $3.55 per MMBtu, down $.07 from yesterday’s close on robust supply/demand ratios in most areas.

While early forecasts called for a net natural gas storage build of about 10 Bcf when the EIA releases its weekly data on December 1, revisions are taking that number lower as traders assess the likely impact of some chilly weather on storage building. While forecasts run widely from modest draws to a build of up to 20 Bcf, most outlooks now suggest a build of about 8 Bcf, which will compare bearishly to a 29-Bcf five-year-average withdrawal and a 21-Bcf pull reported in the same week last year.

Weekly EIA Oil Inventories Report: Draws in All Three Reported Commodities and Hydrocarbon Prices are Down‏

The Energy Information Administration (EIA) has issued its weekly oil inventories report for the week ending Friday, November 4, 2011.   Comparisons of the earlier and less-followed API report, projections for this week’s EIA report, and today’s EIA report are shown below.This report is “bullish” as most inventories were materially less robust than projected.

Upon the EIA’s report release, light crude oil was trading $96.14 per barrel, down $.66 from yesterday’s close for December, largely on jitters from economic uncertainty in Europe. Natural gas for December was trading at $3.667 per MMBtu, down $.078 from yesterday’s close.

Analysts anticipate this week’s natural gas storage report from the EIA will show a net injection from as low as 17 Bcf to as high as 50 Bcf, with an early consensus around 26 to 33 Bcf. The data will compare against historical average builds including a 23-Bcf five-year-average injection and a build of 26 Bcf for the same week in 2010.

Weekly EIA Oil Inventories Report: Gasoline Build, Oil and Distillate Draws, and Prices are Mixed‏

The Energy Information Administration (EIA) has issued its weekly oil inventories report for the week ending Friday, October 28. Comparisons of the earlier and less-followed API report, projections for this week’s EIA report, and today’s EIA report are shown below.   This report is “bullish” as most inventories were materially less robust than projected.

Upon the EIA report release, light crude oil was trading $93.02 per barrel, up $.83 from yesterday’s close for December.   Natural gas for December was trading at $3.77 per MMBtu, down $.01 from yesterday’s close.

Analysts anticipate this week’s natural gas storage report from the EIA will show a build ranged from 59 Bcf to as much as 75 Bcf, compared to a 35-Bcf five year-average injection and a 67-Bcf build in the same week in 2010.

Weekly Oil Inventories Reports for the Week Ending Friday October 28, 2011
Million Barrels API Report Projections EIA Report
Crude Oil
-0.2 0.9 -1.8
Gasoline -1.1 -1.8 1.4
Distillate -3.4 -1 -3.6

Crude Oil Build, Gasoline and Distillate Draws and Prices are Down‏

The Energy Information Administration (EIA) has issued its weekly oil inventories report for the week ending Friday, October 21.  Comparisons of the earlier and less-followed API report, projections for this week’s EIA report, and today’s EIA report are shown below.This report is “bearish” as crude oil inventories were greater than projected.

Upon the EIA’s report release, light crude oil was trading $92.16 per barrel, down $1.01 from yesterday’s close for December. Natural gas for November was trading at $3.631 per MMBtu, down $.027 from yesterday’s close.

Analysts anticipate this week’s natural gas storage build from the EIA will show a net build in the upper 80s billion cubic feet (Bcf.) The build will compare with a five-year average injection of 47 Bcf and a 74-Bcf injection reported for the same week in 2010.

Weekly Oil Inventories Reports for the Week Ending Friday October 21, 2011
Million Barrels API Report Projections EIA Report
Crude Oil
2.7 1.7 4.7
Gasoline 0.2 -2 -1.4
Distillate -1.8 -1.5 -4.3