Thirsty Thursday: An Inventory Report (10/6/22)

Posted: October 6, 2022
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Welcome back to another Thirsty Thursday, the most entertaining hydrocarbon inventory report on the internet! Now that we are into October I think it’s fair game to start drinking some Halloween inspired cocktails. Let’s start off the October cocktails with something easy and delicious; the apple cider mimosa. Now, this recipe is for four people so you’ll just have to find a few friends to share a drink and inventory report with.

Photo by Bonnie Kittle on Unsplash

The EIA had forecasted a build of just over 2 million barrels this last week against the actual reported value of a 1.356 million barrel draw. If you peak below you can see the API also forecasted a build of just shy of 2 million barrels. It is likely both of these forecasts were built on the premise that OPEC+ would indeed follow through with rumours of oil production quota cuts, hence increasing prices and lowering demand. In reality it demand has swung the other way and there was much more than expected.

The API reported a draw of only 1.77 million barrels for last week, presumably for the same reasons as the EIA. We will look at gas prices near the end of the report, however, they have been declining week after week. With gas being so cheap as of late, people could be more willing to fill up before prices increase again, contributing to the modest sized draw.

Not much is new on the SPR crude oil front. Last week’s most recent data point was 422.6 million barrels and this weeks data point is sitting at 416.4 million barrels. A difference of just over 6 million barrels, still right on track with that 1 million per day.

Well, I was correct as per my prediction last week. We did indeed see a larger draw than the previous week which is to be expected based solely on analysis of the bar chart for the past several months. The draw wasn’t nearly as large as we have seen in the past but ~1.5 million barrels is nothing to laugh at!

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

U.S. crude is rounding the corner and seems to be heading back down. The weekly line seen below in blue has remained fairly flat over the last 10-months, enabling this years stock levels to climb back into the expected range over the past 5 years. It wouldn’t be unreasonable to see crude stock move upward over the next few months as the temperature drops and people drive less, increasing oil stock.

Those in the O&G industry should be quite happy this week, both WTI and Brent crude are up this week by ~$9 from this weeks low to high. There are a few factors contributing to the sharp increase over the past week. The two big ones being the API, and more importantly the EIA’s, reported draw in crude stock this week and second, OPEC+ production quota cuts. OPEC+ plan to keep oil prices steady as world economies struggle seems to be working, though there is another party interested in the opposite. The Biden administration is assuredly worried about high gas prices coming into election season. It will be interesting to see how the issue is handled in the coming months.

Natural gas is also up this week, though a 70 cent increase may not sound like much compared to the recent jumps in crude price, it is right on track considering natural gas currently sits at just over $7 and WTI at $88.25. In consideration of the fact that most of the US electricity production comes from the burning of natural gas, and that more electricity is consumed in the winter than in the summer, one should expect natural gas prices to continue to rise over the next few months.

Gasoline stock dipped this week, along with stock of most other things included in the report. Gas prices on the other hand have been nosediving for several weeks and seemed to be on their way back to “normal”. This week was when the pilot (strong demand in the pilot seat and OPEC+ in the co-pilot seat) decided to pull up on the yoke, now we are seeing a sharp increase in gas prices. Gas stations everywhere should be switched over to the winter blend by now which tends to be cheaper than the summer blend, so that could help maintain cheaper gas over the winter.

Prices across the country have increased on average by about 10 cents which honestly isn’t much. It’s a sneaky number though, due to it being an average across the entire country. Prices in California have of course risen, but by much more than 10 cents, the increase as of late is more like 30 cents, while other states have seen much smaller and even cheaper gas than the previous week. Many of the southern states are hot on the heels of Mississippi which has maintained the cheapest gas across the country for a few months now.

Distillates will be an interesting graph to keep an eye on the coming few months as one of its main uses is heating oil, which is more heavily used in the winter than in the summer. It has been getting colder and colder here in Colorado as I’m sure it is elsewhere in the US, which could be responsible for much of the dip in distillate stock over the past week. Propane and propylene on the other hand are surprisingly still on their way up!

There are lots of exciting events in the energy world lately and each one plays its role in moving the numbers we look at in this report. I hope you enjoyed this weeks look at inventory numbers and that we’ll see you next week. Cheers!

Photo by Shelley Pauls on Unsplash

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