Wednesday, June 7, 2017

US Crude Oil Inventories "Unexpectedly" Increase -- June 7, 2107

WTI drawdown: forecast: a 4-million bbl drawdown; actual: a 3.3 million build. Wow. From CNBC. Weekly reports are here (dynamic link). I can hardly wait to see the John Kemp graphs over at Twitter.
  • crude oil inventories: up 3.3 million bbls; now stand at 513.2 million bbls; at this rate (since it's an increase in build, and not a drawdown) the amount of US crude oil inventories will never decrease -- LOL -- see graph below
  • gasoline inventories: increased by 3.3 million bbls
  • refinery inputs: 17.2 million bopd; down 283,000 bopd
  • crude oil imports: 8.3 million bopd; up by 356,000 bopd
  • crude oil imports: over the past four weeks, up almost 10% above the same four-week period last year
WTI drops below $46. Now at $46.44. Next support, $45. If breaks through $45, watch for $42 WTI.

It looks like WTI is dragging down the overall market. WTI now at $46.16 (9:43 a.m. Central Time).

Then look at this:

Maybe I'm mis-reading something, but on a day that WTI drops to $46/bbl, the above graph does not look particularly reassuring for oil bulls.

Weeks to Re-Balance

Prior to the Saudi Surge, the US had 350 million bbls of crude oil in inventory (not including SPR) and 21 days of supply. Folks are talking about re-balancing to the historical 5-year average, which, of course, makes no sense, since the 5-year average was greatly "inflated" by the two-year Saudi surge (2014 - 2016). Granted, US demand is increasing; US is exporting crude oil; and US refineries are exporting refined products, so perhaps one can argue the "350-million" basis is a bit low, but at most, I would assume, 360. So, I'm leaving it at "350" for now.

Just for the fun of it, I was tracking, based on the weekly drawdown how long it would take to "re-balance" -- back to 350 million bbls in US crude oil inventory (see graph below). The numbers don't quite work in some cases, but the raw data is from the EIA. Drawdown (column 3 in millions of bbls is shown as a positive number; any increase in inventory is shown as a negative -- that may be confusing and I may change that in the future).

For example, last week, based on a drawdown of 6.4 million bbls / week, it would have taken about 25 weeks to re-balance. Using an average up to that time of 3.9 million bbls/week over the five-week period, and an inventory of 509.9 million bbls, it would have taken 41 weeks to "re-balance" to 350 million bbls. Whew. 

To "re-balance":
  • with today's increase, the average over six weeks of drawdown: 2.7 million bbls/week on average over the past six weeks
  • with today's inventory number of 513.2 million bbls, it would take 60 weeks to "re-balance" to 350 million bbls.  (Update: methodology was wrong in some parts of this table; it has been updated and corrected at this post):
Weeks to RB
Week 0
Apr 26, 2017

Week 1
May 3, 2017
Week 2
May 10, 2017
Week 3
May 17, 2017
Week 4
May 24, 2017
Week 5
May 31, 2017
Week 6
June 7, 2017

Disclaimer: I make a lot of simple arithmetic errors. 

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