DOE Week of July 20: Solid

  • This report was a bit to the bearish side, but nothing serious.
  • By turnover days, excess crude inventories rose to 2.1 days turnover above long-term averages, but with the pace of increase slowing
  • Excess crude and key products (CGD) rose 2.5 mb to 47 mb by turnover days
  • Net crude imports fell to the third lowest level in the last twenty years on exceptional exports
  • Refinery runs again came in at last year’s level, strong but not record-breaking
  • Total product supplied and gasoline demand both posted solid weeks despite elevated pump prices
  • WTI has moved up a bit from last week, and backwardation remains acute for the next month.
  • However, backwardation overall has softened, but interestingly from a rise at the back end.  That is, the market believes that breakeven production costs will be higher in the out years than earlier thought.
  • Brent and WTI continue to go their own ways, with WTI in steep short-term backwardation, and Brent in soft contango through January.
  • This EIA report gives little support to the notion that the Brent interpretation of the market is right in aggregate.  None of LOOP futures, net crude imports or product exports speak to anything but a robust US market sending impressive volumes into the global marketplace.
  • And as a random tidbit: June L48 production is 1.25 mbpd higher than the EIA forecast for the period a year ago.  And yet Brent oil prices are $18 / barrel higher than the EIA forecast at that time.  Forecasting is hard to do, especially about the future.

DOE July 25, 2018