Welcome back to another Thirsty Thursday, the most entertaining hydrocarbon inventory report on the internet! We’re ramping up the Halloweenyness of the drink this week with the brain hemorrhage shot. Now it’s hard to find royalty-free photos of the brain hemorrhage shot so you’ll have to look it up yourself and enjoy this pumpkin photo instead. This shot is easy to make, consisting of only peach schnapps, Irish cream liqueur, and a few drops of grenadine. Let’s take a look at the numbers!
Inventory levels have cooled off from last week’s build of nearly 10 million barrels. This week the EIA, as did I, forecasted a slight build of 1.38 million barrels and reported a draw of 1.725 million barrels.
The API also forecasted a build, but more in the region of 1.551 million barrels. To almost everyone’s surprise, the actuals on the week went in the other direction. The API reported a draw of around one and a quarter million barrels. This week’s draw can be attributed to exports getting back on their feet after a sluggish few weeks.
The final draw from the SPR was confirmed this week as Biden announced another 15 million barrels would be released. Although it won’t be out for delivery until December, bids are being accepted for another 5 days as of the writing of this report. Considering this past week there was also a release of a few million barrels of oil from the SPR, this week’s draw was even larger than it seems to be looking strictly at the numbers. As of 10/14/2022, the SPR sits at 405 MMBBLS.
The markets are entering unpredictable territory this week. While I guess some would say the market is always unpredictable, and that is somewhat true, there does seem to be somewhat of a pattern in the bar chart below. Some of the major pressures on crude inventory lately include OPEC+ production quota cuts, the Biden administration’s desire to bring gas prices down, and the colder months that lie ahead. While many different factors are playing a role in crude inventory levels, these seem to be the big movers and can help to get an idea of why the market moves the way it does.
The graph below has been updated for this week’s most current numbers as is evident by the small downward-sloping part of the blue line representative of the slight draw. Still within that 5-year range, but the weekly line is getting close to dipping out of it possibly in the next month or so.
While both Brent and WTI are sitting a few dollars short of their monthly highs, both oil prices seem to be holding steady around the mid-80s and low 90s. The lower crude inventories drop the higher the demand and higher the price of oil, which likely describes the jump in oil pricesin the last few days.
Unlike oil, natural gas has plummeted over the last month; especially evident in the graph from this past week. The main cause has been increased domestic production coupled with lower-than-usual exports. This has enabled utility companies to put much of the gas into storage. Domestic production was originally ramped up to allow for more exported gas to Europe, however, European countries are at their storage capacity now and exports have dropped off. While gas production tapers off, gas prices will likely hold steady.
Gasoline stock is more or less sideways this week and gasoline retail prices are trending downward.
As mentioned above, gas prices across the country are on average lower this week than the previous. This week’s average of $3.836 is just a mere 7 cents off from last week’s average. While California has come out of the $6 range, it is still the best place to go to fill up your tank if you don’t like your money. For two weeks in a row, now Georgia has had the cheapest gas of all the states at $3.235 per gallon.
Diesel remains the more exciting of the fuels lately. Over the past week, diesel prices at the pumps have gone up 15 cents. Diesel stock has plummeted the past few weeks and has been flat lately. The Washington Post offers a few reasons for the diesel crisis as of late, a few of the big ones being increased world demand and limited refining capacity. Should diesel prices continue to rise even higher, so too will everything else as diesel is what the world runs on. Everything is either shipped, trucked, flown, or railed by diesel.
We are coming to the end of regular SPR releases as well as entering the colder, winter months, both are big factors in many of the metrics we look at in this report. So be sure to come back next week to get your update on how the markets are responding to world events. In the meantime here is a pretty fall photo taken here in Colorado, cheers!
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