EIA Stuns Oil Bulls -- Huge Inventory Build -- Almost 10x Forecast -- March 14, 2018

Tesla: shipping flawed parts --

• Tesla employees say the company is manufacturing a high ratio of flawed parts and vehicles that need rework and repairs
• the electrical vehicle maker has had to ship some flawed parts to remanufacturing facilities to avoid scrapping them, rather than fixing them in-line, according to sources; Tesla denies this
• CEO Elon Musk is under pressure to ramp up production of the Model 3 sedan, Tesla's first mass-market electric vehicle

Growing pains.

On that news, TSLA shares surged 20% -- investors relieved that Elon Musk would ramp up production no matter what. Just joking. This is not an investment site. Do not make any investment, financial, job, relationship, or travel decisions based on anything you read here or think you may have read here.

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US Gasoline Demand

US gasoline demand increased week-over week. In addition, the most recent 4-week average is also up.

US gasoline demand graphic: pending.

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US Dollar Strength/Weakness

Note:

• US dollar index, historical, currently at "90."
• US dollar index, wiki:

USDX started in March 1973, soon after the dismantling of the Bretton Woods system.

At its start, the value of the U.S. Dollar Index was 100.000. It has since traded as high as 164.7200 in February 1985, and as low as 70.698 on March 16, 2008.

The make-up of the "basket" has been altered only once, when several European currencies were subsumed by the euro at the start of 1999.

The make-up of the "basket" is overdue for revision as China, Mexico, South Korea and Brazil are major trading partners presently which are not part of the index whereas Sweden and Switzerland are continuing as part of the index. [One word: incredible. Comment: and they say there is no "manipulation."]

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Weekly petroleum report here.

Forecast: 560,000-bbl build.

Actual: US crude oil inventory increased by 5 million bopd. Not only are inventories "going in the wrong direction" but this was the biggest build in six or seven weeks, when the build was 6.8 million bbls (January 31, 2018, report).

Other data fro the weekly petroleum report:

• refineries operating at 90% of operable capacity -- last week, 88%
• gasoline production increased, back over 10 million bbs/day
• distillate fuel production decreased but essentially steady at 4.5 million bbls/day
• US crude oil inventories now stand at 430.9 million bbls -- "still in the lower half of the average range for this time of year" [really?]
• despite gasoline inventory decreasing by 6.3 million bbls, gasoline inventories are still in the upper half of the average range for this time of year [graphs will still be quite remarkable]

Re-balancing: with the huge (and unexpected) jump in US crude oil inventory, the number of weeks to re-balance also took a huge jump -- now up to 33 weeks -- the ninth week of increasing number of weeks to re-balance. In fact, with EIA forecasts, one could almost argue that we will never see re-balancing unless a "new normal" is established for the US. That "new normal" would probably have to move from 350 million bbls to 450 million bbls in inventory.

Week	Date	Drawdown	Storage	Weeks to RB
Week 0	Apr 26, 2017		529.0	180
Week 24	October 12, 2017	2.8	462.2	40
Week 25	October 18, 2017	5.7	456.5	37
Week 26	October 25, 2017	-0.9	457.3	39
Week 27	November 1, 2017	2.4	454.9	38
Week 28	November 8, 2017	-2.2	457.1	42
Week 29	November 15, 2017	1.9	459.0	43
Week 30	November 22, 2017	1.9	457.1	42
Week 31	November 29, 2017	3.4	453.7	41
Week 32	December 6, 2017	5.6	448.1	37
Week 33	December 13, 2017	5.1	443.0	36
Week 34	December 20, 2017	6.5	436.5	30
Week 35	December 28, 2017	4.6	431.9	28
Week 36	January 4, 2018	7.4	424.5	25
Week 37	January 10, 2018	4.9	419.5	23
Week 38	January 18, 2018	6.9	412.7	20
Week 39	January 24, 2018	1.1	411.6	20
Week 40	January 31, 2018	-6.8	418.4	24
Week 41	February 7, 2018	-1.9	420.3	26
Week 42	February 14, 2018	-1.8	422.1	27
Week 43	February 21, 2018	1.6	420.5	27
Week 44	February 28, 2018	3.0	423.5	28
Week 45	March 7, 2018	2.4	425.9	29
Week 46	March 14, 2018	-5.0	430.9	33

All we can do now is wait for John Kemp's graphs to see how bad  this really is (posted later, see below).

WTI is down about half a percent and is getting very, very close to the $60-floor, currently trading at $60.34. Perhaps the only thing keeping WTI above $60 is the weak US dollar.

Selected graphs from John Kemp.

Refinery throughput is simply staggering:

And refineries have a lot of oil with which to work:

This is the only graphic that might explain why WTI holds above $60 (along with the weak US dollar).