Will North Dakota Oil Production Show An Increase Or Decrease When November, 2015, Data Is Reported This Week -- January 13, 2016

Poll at the top of the sidebar to the right.

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Unexpected As Reuters Suggests, 

Or Expected As John Kemp Might Suggest?

 Reuters is reporting:

U.S. crude stocks fell unexpectedly last week, while gasoline and distillate inventories built, data from industry group the American Petroleum Institute showed on Tuesday.

Crude inventories fell by 3.9 million barrels in the week to 480.071 million, compared with analysts' expectations for a increase of 2.5 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 302,000 barrels, API said.

Regular readers of the blog may not be surprised. This was discussed a couple of days ago in a long blog on gasoline demand in which it was noted that John Kemp said that the 2015/2016 straddle resulted in artificially high crude oil stock. Crude oil stocks for this end-of-year straddle was the worse in a decade:

It is interesting that John Kemp in his Reuters article suggested that the huge rise in US gasoline stocks reported most recently is simply an anomaly of year-end shenanigans.

The 10.6 million barrel jump in U.S. gasoline stocks last week, reported by the Energy Information Administration on Wednesday, sent gasoline futures tumbling 4 percent and intensified the selloff in oil prices.

Estimated gasoline consumption was also down 1.2 million barrels per day (bpd), over 13 percent, compared with the prior week, adding to market alarm about the health of fuel demand.

But most of the increase in stockpiles and apparent drop in fuel consumption was likely due to year-end seasonal quirks rather a sign of slackening consumption.

The latest data on gasoline consumption, production and stocks are for the week ending on Friday Jan. 1 and straddle year-end.

In the previous five years, from 2010/11 to 2014/15, gasoline stocks increased by an average of more than 6 million barrels over the year end period, with increases ranging from 3.6 million to 8.1 million barrels.

But let's look at the figures again, or as they say in the Hillary camp, let's parse that article:

• the jump this past week was 10.6 million bbls; let's round that to 11 million bbls
• the jump for similar weeks straddling the old year/near year averaged 6 million bbls
• 6 million bbls is not half of 11 million bbls, but it's awful darn close
• the range over the past five years has been 3.6 to 8.1 million bbls (rounding: 4 to 8 million bbls)
• the 11 million bbls exceeds anything we've seen in the past five years, and not by a trivial amount (double-digit jump this year; single-digit jump all previous years)
• in fact, a jump of 11 million bbls is almost three times the smallest jump

the fact that oil futures hardly reacted to the news suggests analysts were expecting this.

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Venezuela -- Tick, Tick, Tick

The Wall Street Journal is asking which country or which countries will "break"?

Petrodollars are rapidly turning into petropennies. As oil prices flirt with the $30-a-barrel level, a key question becomes whether producing nations can continue to stand the pain.

Assessing the economic and political risks to major exporters is far from straightforward. Depending on whom you ask, the crude price large producers such as Russia, Saudi Arabia, Iran, and Venezuela require to balance their budgets is anywhere from the high double digits to low triple digit dollars per barrel.

The Journal's analysis may surprise you. It may not be Russia or Venezuela, but rather ... drum roll ... Saudi Arabia:

Seemingly insulated Saudi Arabia actually may be less secure.

Its budget deficit hit about 15% of gross domestic product last year and the government recently has taken unprecedented steps such as fuel and water subsidy cuts to ease fiscal pressure, not to mention disclosing plans to sell part of national oil champion Saudi Aramco. The coming months will show how the so-called social bargain, in which there is no income tax and the vast majority of Saudis work in some capacity for the government, holds up in an age of austerity.

With both Shiite minority dissidents and Islamic State challenging the monarchy while its military is involved a war in neighboring Yemen, it is an awkward time to put public sentiment to the test.

I have no idea if "15% of GDP" is significant or not. Let's check on the US budget deficit as a percent of GDP:

The United States recorded a Government Budget deficit equal to 2.50 percent of the country's Gross Domestic Product in fiscal year 2015. It is the lowest budget deficit in 7 years. Government Budget in the United States averaged -3.02 percent of GDP from 1948 until 2015, reaching an all time high of 4.60 percent of GDP in 1948 and a record low of -12.10 percent of GDP in 2009. Government Budget in the United States is reported by the U.S. Treasury.

This would suggest that Saudi Arabia's budget deficit is SEVERE.