RBN Energy: the impact of Harvey on crude oil markets.
Our preliminary estimates for the U.S. averages for this past week are that crude oil production will be down by 0.8 MMb/d to 8.7 MMb/d, reflecting about 1.2 MMb/d of production offline at the peak of the outage (mostly offshore and Eagle Ford). Imports are expected to be down by about 1.1 MMb/d to 6.8 MMb/d due to significant cargo cancellations into the Gulf Coast.
Consequently, total supply is projected to be down by 1.9 MMb/d (compared to the previous week) to about 15.5 MMb/d. Refinery-run reductions are projected to peak at about 3.0 MMb/d (up to more than 4.0 MMb/d including Port Arthur/Beaumont outages that did not happen until later in the week).
That works out to a decline in refinery runs of about 2.1 MMb/d for the week. Exports are projected to be down to about 0.3 MMb/d, or about 0.6 MMb/d below last week.
As a result, total demand is estimated to be lower by about 2.7 MMb/d to 16.0 MMb/d, implying a storage withdrawal of about 3.3 MMbbl. After we did those numbers, on Thursday, August 31, DOE released 1.0 MMbbl of oil from the Strategic Petroleum Reserve on an exchange deal with Phillips 66 for their Lake Charles refinery.
Regardless, if these numbers are in the ballpark, instead of building inventory because of all the refinery outages, the industry will withdraw from inventory due to production shortfalls and especially lower imports.
But don’t forget, much of the inventory is still sitting in vessels out in the Gulf of Mexico, just out of the reach of government statisticians. These volumes will be coming in just as soon as Gulf Coast docks are up and running.