Thirsty Thursday: An Inventory Report (11/10/22)

Posted: November 10, 2022
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Welcome back to another Thirsty Thursday, the most entertaining hydrocarbon inventory report on the internet! It’s cold this week, warm yourself up with the classic whiskey highball, parts whiskey (bourbon or scotch will also do the trick), soda water or ginger ale, and garnished with a lemon. A few sips will warm you up in no time, the perfect sipping cocktail to pair with this week’s inventory report!

Photo by Thomas Park on Unsplash

A build this week!? I thought we were only supposed to see draws now that the SPR has quit releasing oil every week. If that was your first thought when seeing the EIA and API reports this week you weren’t the only one. The EIA reported a build of 3.925 million barrels of oil against a forecast of 1.360 million barrels. Although there are no more planned contract sales of oil from the SPR, the deliveries will still happen until the end of the year. So we can’t quite disregard the SPR as a player in oil inventories just yet.

The API reported an even larger build than the EIA at 5.618 million barrels of oil against a conservative forecast of just 1.1 million barrels.

In the week ending November 4, the SPR released 3.5 million barrels of oil. That brings the total left in the SPR down to 396 million barrels of oil, the lowest since April 1984. If you, like me, are still waiting in seeing what kind of effect the absence of SPR releases will have on inventories, you’ll have to wait until after the final delivery which is slated to happen before December 31.

While most of this week’s build can be attributed to the 3.5 million barrels of SPR oil, where is the rest coming from? Perhaps producers are slowing down due to high inflation and supply chain issues, resulting in a higher cost and longer time to produce a barrel of oil.

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

Both WTI and Brent took a hit this week. One factor to consider is the recent resurgence of COVID in China, specifically in the city of Guangzhou, a major manufacturing city. More COVID cases mean the country could throttle manufacturing and oil demand would drop. Fears of weak demand from another shutdown in China could be pressuring oil prices downwards. After the EIA and API released their inventory reports yesterday, prices began to crawl back up to $87+ for WTI and $94+ for Brent.

A bearish front is growing around natural gas prices. After spiking earlier this week the price of natural gas has fallen below $6 before a slight recovery. Fears of more moderate-than-expected weather in November combined with full storage tanks in Europe and a demand issue in China don’t make for a positive outlook on futures prices.

Nothing new in this section, gasoline stock continues its downward slope, and gas prices tick upwards this week, granted not by much. The EIA blames rising fuel efficiency for offsetting rising gasoline prices in the next year or so.

The national gas price average has increased for another week now, this time by 3 cents to $3.803. California gas is averaging the highest in the nation at $5.458, meanwhile Texas and Georgia battle it out for the lowest at $3.162 and $3.164 respectively.

Not only did gasoline get more expensive but so too did diesel, no surprise there. Across the country, diesel is averaging $5.362, which is $1.72 more expensive than this time last year. For some perspective, gasoline is 11% more expensive than last year and diesel is 46% more expensive than this time last year. The reason for diesel being so expensive is pretty clear in the distillate stock graph below. Diesel stocks are low, very very low. The main driver behind the diesel crisis? Refineries issues. Some haven’t reopened since the COVID shutdowns and some are performing routine maintenance. Refining capacity is maxed out and struggling to recover.

I appreciate you coming to look over inventory and price numbers with me this week and hope you enjoyed my report! Come back next week for another update, cheers!

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