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Welcome to this week’s Thirsty Thursday: An Inventory Report. This is Scott stepping in for Tavis this week. This week with the heat of the summer, we are suggesting a refreshing drink from Brazil: The Caipirinha. This relatively simple cocktail is Brazil’s national drink and only requires rum, limes, sugar, and ice. So gather up some friends, make a pitcher, and pour some glasses while reviewing this week’s update to the inventory report.
Crude Oil Stocks
The EIA expected a relatively small build of about 567,000 barrels but actually saw a much larger build than expected. About 5.85 million barrels were added to the reserves which regained almost a third of the massive 17 million barrel draws from last week. Markets were not phased by this build and continued on their existing trends after the data was released.
The API expected more bullish inventories, predicting a 233,000 barrel drawdown, but also recorded a moderate build similar to the EIA of 4.07 million barrels. Both entities seemed to be aligned again this week both with their expectations and the actual estimates.
As you might expect, our weekly inventory change shows a reversal from the massive drawdown last week, but still falls in line with a continued downtrend in oil inventories since a peak in March. While still within the 5-year band that has become very large due to inventory swings during the COVID lockdowns, inventories appear to be continuing downward towards the lower averages in the short term.
Oil and Natural Gas Prices
Commodity prices have not been phased by the weekly builds as oil benchmarks continue to rise this week. Oil had a volatile day on August 8th, dipping to under $80/bbl before closing at almost $83/bbl. From there it was off to the races as the next day reached as high as $84.63 and closed above $84/bbl. It appears that the test downward to $80 may have been a key point for crude to gather itself before continuing towards $88/bbl in the coming weeks. Recent moves in oil have seemed unusual as they are not moving in tandem with the rest of the market. Brent is experiencing a similar trend, but it is difficult to tell if the spread between the two will continue to shrink or try to widen again.
Natural gas seems to have finally started to come out of its long-term slump following the aggressive oil price movements. It is still well below prices from the beginning of the year, and may still fall back to where it has been sitting for the last two quarters. Time will tell as we enter the shoulder and colder months if there will be similar inventory issues across the Atlantic and what pipeline capacity looks like in the US as we get closer to 2024.
Fuels Market
Gasoline inventories saw a small draw this week of 2.7 million barrels, which put it back on the average decline trend since June. Refinery inputs have been mostly flat week-over-week at rates not seen in almost a year, but summer driving is not over yet as gasoline demand is up this week. Gasoline inventories remain below the historical 5-year range and look like they may continue along the 5-year low in the coming weeks.
Prices have remained relatively flat week over week, but if inventories continue to draw down through the rest of the summer there may be pain at the pump on the horizon. The most expensive gasoline remains in California, and the cheapest in Mississippi ranging from $5.090 and 3.314 respectively. Diesel prices are up another 10 cents from a week ago and nearly 40 cents above the July average.
Distillates are still trending downward as they continue to edge toward the bottom of the historical range. Propane on the other hand, has created another week of 5-year highs as inventories continue to build before the winter months.
Crude Oil Imports/Exports
Net crude oil imports rose nearly 300K bbl/d from the last reporting period, which is the highest net import volume since January 2022. The main driver for this was an unusually large drop in exports for the week as the import volumes have continued to remain relatively flat.
Crude oil imports over the short term have continued to move sideways to show a generally long-term flat trendline. Exports have become more and more volatile each week over the last several months, but have continued an overall upward trend.
US Weekly Import/Export Data (Aug 4)
| Product | Imports (Mbbl/d) | Exports (Mbbl/d) | Net (Mbbl/d) |
|---|---|---|---|
| Crude Oil | 6,682 | 2,360 | 4,322 |
| Other Petroleum Products | 1,801 | 6,411 | -4,610 |
| Total Oil + Products | 8,483 | 8,771 | -288 |
Mexico is back on top for exports this month with the country receiving the most oil and products from the US. China, Canada, and the Netherlands continue to import similar volumes month over month from the US, while south Korea becomes the 5th largest importer for May. Imports of oil and products from OPEC countries has fallen in the last month, likely due to the extended production cuts announced through September.
US Monthly Import/Export Origin and Destination Data (Month of May 2023)
| Export Destination | Total (Mbbl) | Import Origin | Total (Mbbl) |
|---|---|---|---|
| Mexico | 31,214 | Canada | 140,206 |
| China | 24,951 | Mexico | 28,316 |
| Netherlands | 23,177 | Saudi Arabia | 11,049 |
| Canada | 22,927 | Iraq | 9,409 |
| Japan | 17,968 | Colombia | 7,460 |
That’s it for this week. Everyone at RARE PETRO hopes you are enjoying your summer!
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