The Number Of Active Rigs In North Dakota Remain High; Idle Rambling On The Price Of Oil

Active rigs in North Dakota:

	2/9/2014	02/09/2013	02/09/2012	02/09/2011	02/09/2010
Active Rigs	192	185	203	163	90

 

 Idle Musings On The Price Of Oil

Going into next week, it will be interesting to see if the price of crude oil continues to melt up;  WTI closed this past week at just around $100/bbl. It was expected that the price of crude oil would rise once the Keystone XL 2.0 South started flowing; it started flowing on January 22, 2014 (though the company started filling it on December 7, 2013), and the price of oil started moving up as predicted, though hardly noticeable in the big scheme of things. It will take awhile for folks to get a feeling for the "new" Cushing. A lot of oil has to go to Cushing to make up for all that the Keystone XL 2.0 South is taking out.

The major factors affecting the price of oil:

• Mideast politics and hostilities (Syria, Iran, Israel); sabre-rattling
• strength of the dollar
• US economy six months out
• Chinese manufacturing index
• global economy six months out

Of the five, I think the US economy six months out as telegraphed by the Fed's actions is the most important. On a day-to-day basis, all things being equal (e.g., no report of a war breaking out in the Mideast, it is the strength of the dollar).

If the huge GM and Ford truck inventory is due to the weather, that's one thing; but if the huge truck inventory is due to prospects about the US economy going forward, the huge inventory is very concerning.

Most recent data available, the week ending January 31, 2014, the EIA summary: 

• U.S. crude oil imports averaged 6.9 million barrels per day last week, down by 1.2 million barrels per day from the previous week
• over the last four weeks, crude oil imports averaged over 7.3 million barrels per day, 6.5% below the same four-week period last year
• U.S. commercial crude oil inventories increased by 0.4 million barrels from the previous week
• U.S. crude oil inventories are in the upper half of the average range for this time of year
• gasoline inventories increased by 0.5 million barrels last week
• gasoline inventories are well above the upper limit of the average range
• distillate fuel inventories decreased significantly last week
• distillate fuel inventories are well below the lower limit of the average range for this time of year
• propane/propylene inventories fell 0.8 million barrels last week
• propane/propylene inventories are below the lower limit of the average range
• total commercial petroleum inventories decreased by 5.3 million barrels last week

30-second sound bites:

• US oil imports are falling significantly
• crude oil inventories increased despite significantly decreased imports
• crude oil inventories remain in the upper half of the average range for this time of year
• gasoline inventories increased last week

That explains why gasoline continues to fall in price. Gasoline is now below $3.00/gallon for the first time in a long time in the Dallas, Texas, area.

Remember all that hand-wringing that US refineries were not able to process light, sweet oil coming out of the Bakken? The fact that imports of crude are decreasing significantly and gasoline inventories are increasing suggest to me that US refineries are doing just fine. It should be noted that the US does continue to import gasoline.

If crude oil inventories continue to remain in the upper half of the average range, I assume we will see a continued fall in imports. I assume some imports are contractually required, and as those contracts are filled/expire, imports will continue to fall.

Weekly Supply Estimates: days of gasoline inventory, US, source:

• 1/31/14: 23.3 days of inventory
• 1/24/14: 22.9 days
• 1/17/14: 22.2 days
• 1/10/14: 21.8 days
• 1/03/14: 22.2 days
• 12/27/13: 22.3 days

Media

CNN pulls Anderson Cooper's AC360 Later from primetime.