EIA Weekly Petroleum Report -- Surprise Crude Oil Build But Distillate Fuel Now 22% Below Five-Year Average; WTI Holds, Maybe Even Up A Bit -- May 4, 2022

Link here.

• US crude oil in storage surprises everyone with an increased build of 1.3 million bbls, and now stands at 415.7 bbl, 15% below the five-year average -- wow!
• looks like more room for another SPR release
• US imported 6.3 million bopd, up by 397,000 bopd; the average of 6.0 million bopd is 3.3% greater than the same period last year (yawn)
• US refiners are operating at --- they drop below 90% -- 88.4% of their operable capacity; what does that do to distillates?
• distillate fuel inventories decreased by 2.3 million bbls; and are now 22% below their five-year average:
• refiners need that heavy oil from Canada to produce distillate fuel
• too bad the Keystone XL was killed. 
  
• jet fuel supplied was up 28.2% compared with same four-week period last year
  gasoline demand will be posted later.

Maybe Biden's auditors can start here, link here:
 

Conspiracy theory:

• API, non-government: huge drawdown yesterday; should drive prices higher all things being equal;
• EIA, from Biden's government: a surprise build; all things being equal, should drive gasoline prices at the pump lower, which is what the Biden administration would like;
• WTI price doesn't drop despite that EIA surprise build
• here's the conspiracy theories: 
• are traders thinking the same thing I'm thinking?
• do you trust the API (non-government) numbers or do you trust the EIA (the Biden) numbers?
• I've always gone with the EIA, but ...

WTI:

• up about 4% today;
• trading up $4.04 / bbl -- think about that -- up $4.04 / bbl
• trading at $106.50

Which brings me to another topic: DUCs.

With WTI at $105 not one single drilled well should come off the confidential list as a DUC -- drilled but uncompleted.

This is like Tesla having all those $100,000/car orders and not being able to meet demand.

Oil companies must be seething. Drilling a well to completion, seeing $106.50 on the WTI ticker and unable to get the well fracked.

This is where analysts / experts and I part company.

It's  not the rig count that matters; it's the ability to get drilled wells completed. 

As long as I see one well in the Bakken coming off the confidential list as a DUC, it tells me we have "enough" rigs (don't take that out of context) but not enough frack spreads to complete the wells. 

Today, of the five wells coming off the confidential list (yesterday and today), only two reported production. The other three, by definition, are DUCs, although it's possible they aren't even drilled yet, I suppose, and then in that case, the additional rigs would be nice. So, to some / great extent I might be wrong but as long as I see DUCs, I see more need for frack spreads than more rigs.

Having said that, a number of great operators that should be drilling in the Bakken now are not drilling. 

The faux environmentalists would be happy: "Leave it in the ground."

In round numbers, I think less than a thousand wells will be drilled in the Bakken this calendar year, and there are about 500 Bakken DUCs.