Thirsty Thursday: An Inventory Report (9/8/22)

Posted: September 8, 2022
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Welcome back to another Thirsty Thursday, the most entertaining hydrocarbon inventory report on the internet! Here again is Nick to give an update on this week’s numbers. In honor of yesterday being national beer lovers day this week’s drink is, naturally, beer. While you may not live in an area as dense with breweries as we are here in Colorado, grab your favorite beer, your favorite friend, and dive into this weeks inventory report.

Photo by Josh Olalde on Unsplash

We’re red this week, in more ways than one. Both the EIA and API reported builds this week. The EIA reported a build of over 8.8 million barrels over the past week, after they expected the opposite, a drawdown of a quarter million barrels. The build is likely due to the increased imports over the last week and even more assuredly due to the release of more oil from the Strategic Petroleum Reserve (SPR).

Over here at Rare Petro we were surprised to see such a build, apparently so were the folks over at the American Petroleum Institute. The API expected an even larger draw than the EIA at more than 0.7 million barrels. Boy were they off, but who can blame them. The API also reported a build of only 3.645 million barrels.

As mentioned earlier, the SPR is responsible for most of the build. As per the Biden Administrations instructions 1 million barrels per day are still being released. That trend will continue as late as early October, after which the SPR will remain stagnant until the beginning of 2023 when the current plan to refill the reserve will be put into action.

Yet a new low has been reached by the SPR, this is the lowest the reserves have been at since 1984. Now keep in mind the reserve was begun in 1975 and slowly filled over the next three and a half decades until it peaked in 2010. So the last time the SPR was this low was when it was initially being filled, do with that information what you will, but it does come across as slightly concerning.

This weeks U.S. Crude Oil Inventories according to the EIA

The bar chart above makes this week’s build really stand out when compared to the last 3 weeks of drawdowns. And, as can be easily inferred, the build is one of the largest three in the past several months. But again, how much of a build is it really if most of the oil is flowing from the SPR?

Both Brent and WTI crude slide further in price this week. WTI reached its weekly, and 8 month for that matter, low on Friday at $81.94. Brent also reached its lowest price since last January on Friday at $88 even. These lows come off the back of rising interest rates in response to spiking inflation. Despite OPEC’s best efforts to keep oil prices up, global fear of worsening COVID lockdowns is hindering the economic growth that really drives oil prices.

Natural gas prices are struggling for the same reasons as oil prices, fear is holding back economies from letting loose. Strong gas production is also responsible for falling prices.

U.S. gasoline stocks remain below the 5-year range, although do follow form by dipping from around May to November. California takes its “highest priced gas in the country” crown back from Hawaii this week with a state average of $5.306 with Hawaii just 1 cent behind. While gas prices in some of the more expensive states have risen in the past week, the general trend is downward. Falling oil prices typically mean falling gas prices, a not-so-surprising phenomenon that experts believe to be behind pump savings.

Distillate stocks remain outside the 5-year range, whereas propane/propylene stocks follow their 5-year range to a T. Distillate stock is usually built up in the months leading up to the winter, when it is typically used for heating. With stock levels lower than is usual for this time of year, experts are confident the combination of winter demand and waning supply will help to drive prices up.

While those in the industry like to lament about falling oil prices I think we can all agree it is nice to be spending a little less when filling up our vehicles. Hopefully this week’s report along with your beer were enough to quench your thirst. Thanks for joining us this week and we look forward to seeing you again for next week’s report, cheers!

Photo by Wil Stewart on Unsplash

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