Thirsty Thursday: An Inventory Report (10/13/22)

Posted: October 14, 2022
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Welcome back to another Thirsty Thursday, the most entertaining hydrocarbon inventory report on the internet! The closer we get to Halloween the more festive the weekly cocktails are going to get. This week we are drinking the zombie cocktail. Now, there’s a lot that goes into this one, and it’s mostly rum, so stick with me here. The zombie cocktail is 1 ounce of light rum, dark rum, apricot liqueur, Bacardi 151 Rum, 2 ounces orange juice, and a bit of lime bitters and ice. I’m not exactly sure why it’s called a zombie cocktail but I think it might have something to do with how you’ll be feeling after drinking it, so be responsible, grab a friend and lets dive into this weeks inventory numbers.

Photo by Daniel Horvath on Unsplash

My first reaction to the EIA’s crude inventory number report this week was “Woah, that’s a big number!”, I’m sure the analysts over at the EIA had the same reaction when they went to update the ‘actual’ number for the week as they only forecasted a build of 1.75 million barrels. This last week the EIA reported an actual build of nearly 10 million barrels!

The API didn’t even bother with a forecast this week and reported an actual build of just over 7 million barrels. While some have attributed this weeks build to the SPR’s release of 7.7 million barrels, others have noted that the SPR has been releasing a similar amount, if not more, every week over the past few months and we haven’t seen builds like this on a weekly basis. A more likely reason for the build is that US exports of crude oil are down.

The Gulf Coast region saw the bulk of the recent build, indicating another possible source could be all the production from facilities brought back online after being shut down during hurricane Ian a few weeks ago.

Predictably, the SPR dumped out another 7.7 million barrels of oil. There are only a few more weeks left until the SPR will cease releasing oil. For more information on the SPR events as of late check out our article Will Diminishing DUC Inventories and a Depleted SPR Drive Higher Oil Prices?

Look at that build! It marks the largest we’ve seen since March 10, 2021 when Texas was recovering from the freeze over that halted most oil and gas related activities. The last few large builds were followed by a week or two of somewhat smaller ones, perhaps the pattern will continue in the following few weeks.

This weeks U.S. crude oil inventories according to the EIA

The graph below hasn’t yet been updated by the EIA, however, the raw data has been and as we have already talked there was a ~10 million barrel build over the week. When the graph is updated on the EIA website I’ll be sure to swap out the old one below. In the meantime you can imagine an upwards sloping blue line at the end of last week’s draw.

If you thought last weeks oil prices were good, you won’t be disappointed this week wither. WTI and Brent are both holding steady in the high $80s and low $90s respectively. Intraday prices of both WTI and Brent increased by over $3 from their lows this morning.

Natural gas is currently sitting at $6.610 which sounds great when compared to prices from the beginning of the year when gas was $3 less, however, is not so great when compared to prices from just over a month ago when gas was $3 more.

Gasoline stock is trending upwards this week which it hasn’t done for a few weeks. Gas stock increased by 2 million barrels over the week ending October 7.

Gas prices across the country are up a bit this week from last weeks average of $3.867. Diesel on the other hand is up over 30 cents from last weeks average of $4.883. OPEC+ decision to decrease oil production quotas so far has had little effect on actual production, however, fear of rising oil prices have caused a slight bump in gas prices as people want to fill up before costs go up. California remains in a league of its own with average gas prices over $6, while the rest of the country is sitting in the $3-5 range. Georgia now has the cheapest gas in the country at $3.267. A little bit too far of a drive from Denver to reap the benefits of such cheap gas. Maybe if it drops below $2 I’ll make the trip.

Distillates were and are in high demand, contributing to the draw of nearly 5 million barrels on the week. Both heating oil and diesel are in high demand not only in the country but worldwide, that combined with supply issues such as refinery fires in Texas, have made stock levels crash and as we see above, the cost of diesel rise.

The tug of war over oil prices between the Biden Administration and OPEC makes for some interesting discussion in the rest of the energy industry. It will be interesting to see how it all unfolds in the coming few weeks. Make sure to check back in next week for a quick update, cheers!

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