Wednesday, November 21, 2018

Weekly US Crude Oil Stores Jump Again -- November 21, 2018 -- Re-Balancing Back In Focus

Link here.

US weekly crude oil inventory data, EIA:
  • increased by a whopping 4.9 million bbls; WTI holds, actually up almost 2% despite this -- something is going on ....
  • US crude oil inventory: 446.9 million bbls
  • refinery operating capacity: 92.7% -- fairly robust
  • total product supplied: up an astounding 6.9% over the same four-week period one year ago
  • distillate fuel: up an astounding 9.6% over the same four-week period one year ago
  • jet fuel: continues its upward trajectory -- up 2.4% compared with the same four-week period last year
See the "re-balancing" tag.

Wow, it's hard to believe I started tracking this issue -- re-balancing -- back on January 24, 2017. I tracked it for about a year before I finally felt I had an understanding of the issue.

My first spreadsheet was posted May 3, 2017. This was about the time Saudi Arabia knew it had to turn off the spigots. Saudi tried killing the US shale sector by opening the spigots from 2014 to 2016. That tactic almost drove Saudi Arabia into bankruptcy.

So, the data points, US crude oil inventory:
  • pre-2000, historical inventory: about 350 million bbls; the US got along "just fine" with 350 million bbls of crude oil in storage through the 60s, 70s, 80s, and 90s
  • 2017: 530 million bbls
  • need to re-balance: back to 450 million bbls (back in early 2017, I set 350 million bbls in storage as the "re-balance" target)
  • my threshold: 400 million bbls 
  • I'll move the "re-balance" target to 400 million bbls in the spreadsheet below because it's pretty obvious this has been re-set
  • it's interesting that John Kemp, Reuters' oil analyst no longer tweets weekly US crude oil inventory; my hunch: he will soon start posting that data
I believe that we dropped to a low of around 420 million bbls after a year of re-balancing. But since then, US shale production has skyrocketed -- outpacing experts' forecasts.

Today, we stand at 447 million bbls. So the spreadsheet begins anew, but slightly different format:

  • First column: chronologic week, beginning November 21, 2018
  • change w-o-w: week-over-week change in US crude oil inventory as reported by the EIA
  • weeks to RB: weeks to re-balance; at the current rate of drawdown, the number of weeks it will take to get back to 400 million bbls; this will be based on the on-going average, not just the current week
  • because there was a "build" this week, it is obvious one, weeks to "re-balance" is N/A
US crude oil supply, days of supply, for newbies:
  • below 20 days, very, very bullish for oil sector
  • 22 days -- about the historic average before the US shale revolution
  • 26 days -- about the average to expect with US shale revolution and some constraint
  • over 30 days -- very, very bearish for oil sector
Current data:

Up until a few weeks ago, "we" were trending down toward 22 days, but since then trending back toward 27 days, link here:

For newbies: 22 days versus 27 days may not sound like much, but 22 days is close to 21 days, or three weeks; 27 days is close to 28 days, or four weeks. In every sector in the US, "just-in-time" delivery is defined as "two-weeks of inventory." For the US oil sector, JIT is about three weeks. The range is 21 days to 35 days, three weeks to five weeks. We are pretty much in the middle of that range.

No comments:

Post a Comment