across the board inventory build despite distillates exports at an 18 month high on a 1.134 million barrel per day drop in demand for fuel
US oil prices fell for the first time in five weeks as ongoing ceasefire talks between Israel and Hamas in Egypt tempered the geopolitical risk premium underlying recent oil price strength….after rising 4.5% to a five month high of $86.91 a barrel last week on threats to supply from increasing hostilities in eastern Europe and the Middle East, the contract price for the benchmark US light sweet crude for May delivery fell nearly 3% in the opening minutes on Monday, after Israel reduced its troops in Gaza and sent a team to Egypt for talks with Hamas ahead of the Eid holidays, but recovered from a morning low of $84.69 to settle down just 48 cents at $86.43 a barrel, as the ceasefire talks between Israel and Hamas had reduced somewhat the geopolitical risk premium.…oil prices continued to trend lower in overnight trading amid ongoing talks for a ceasefire in Gaza, but rallied mid-morning after the commander of Iran’s navy said it could close the Strait of Hormuz, if deemed necessary. but faded again late to settle $1.20 lower at $85.23 a barrel as traders kept their eyes on the talks for a Gaza ceasefire….oil prices moved higher overnight after Israel’s Foreign Minister stated that Israel would attack Iran, if Iran attacked its territory in retribution for Israel’s deadly attack on its consulate in Syria, then slid back to unchanged early Wednesday morning after a hotter than expected consumer price report took demand-seducing rate-cuts off the table, then fell further after EIA data showed crude oil and fuel inventories swelled by much more than was expected on weak demand and lower oil exports, but rebounded to settle 98 cents higher at $86.21 a barrel after an Israeli airstrike killed the three adult sons and four grandchildren of Hamas political leader Ismail Haniyeh, clouding the prospect for a ceasefire between Israel and the militant group…oil prices rose in early Asian trading Thursday, on forecasts for strong demand in the US, the world’s biggest oil consumer, and rising concerns over global oil supply routes in the Middle East, but erased those gains early in the New York session, weighed down by the expectations that the Fed would not cut interest rates until September, instead of sooner, following a third consecutive higher than expected consumer inflation reading, and settled $1.19 lower at $85.02 a barrel, as weak domestic demand for fuel and concern over the effect of inflation on consumer spending prompted a pullback…however, oil prices surged 2% in early trading Friday, on intelligence reports suggesting that Iran would attack Israel within 48 hours, but pared those early gains to settle 64 cents higher at $85.66 a barrel, with trading shaped by the push-and-pull of U.S. macroeconomic indicators on the one hand and the escalating rhetoric between Israel and Iran on the other…oil prices thus finished 1.4% lower for the week, after nearing a six-month high early in the week on concern that Iran would retaliate for a Israeli attack on Iran’s embassy in Damascus…
meanwhile, natural gas prices finished lower for the 2nd time in three weeks, as producers exited the winter with almost 39% more gas in storage than normal at this time of year… after rising 1.2% to $1.785 per mmBTU last week as more natural gas producers restrained their output, the contract price for natural gas for May delivery opened two cents higher on Monday and rose gradually throughout the session, as production figures remained modest and weather forecasts were neutral, and settled 5.9 cents higher at $1.844 per mmBTU, amid expectations for a seasonally modest storage injection, as lower production offset the impact of mild spring weather…natural gas prices opened 4 cents higher on Tuesday, supported by maintenance-induced declines in production, but failed to maintain momentum and settled just 2.8 cents higher at $1.872 per mmBTU, as speculation about potential disruptions to LNG exports out of Corpus Christi tempered early gains…natural gas prices opened 4 cents higher again on Wednesday on continued maintenance-induced production declines and on strong LNG export demand, but again backed off the early highs to settle 1.3 cents higher at $1.885 per mmBTU, with price gains limited by the huge amount of surplus of gas in storage and negative spot power and gas prices in parts of Texas, California and Arizona over recent weeks….natural gas prices opened 6 cents lower on Thursday, as traders apparently anticipated a bearish storage report, and continued falling to settle down 12.1 cents at a two week low of $1.764 per mmBTU following a larger-than-expected inventory increase and forecasts for benign weather and weak demand ahead….natural gas prices held near that level in Friday’s trading, on worries about a huge storage surplus and forecasts for lower demand over the next two weeks than previously expected, and settled six-tenths of a cent higher at $1.770 per mmBTU, and thus ended 0.8% lower for the week..
The EIA’s natural gas storage report for the week ending April 5th indicated that the amount of working natural gas held in underground storage rose by 24 billion cubic feet to 2,283 billion cubic feet by the end of the week, which left our natural gas supplies 435 billion cubic feet, or 23.5% above the 1848 billion cubic feet that were in storage on April 5th of last year, and 633 billion cubic feet, or 38.4% more than the five-year average of 1,650 billion cubic feet of natural gas that had typically been in working storage as of the 5th of April over the most recent five years…the 24 billion cubic foot addition to US natural gas working storage for the cited week was more than the 15 billion cubic foot addition that the market was expecting, and it was also more than the 11 billion cubic feet that were added to natural gas storage during the corresponding first week of April 2023, while it matched the average 24 billion cubic foot injection into natural gas storage that has been typical for the first week of April over the past 5 years…
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending April 5th indicated that after a big drop in our oil exports, we again had surplus oil to add to our stored commercial crude supplies for 9th time in eleven weeks and for the 17th time in the past 25 weeks, despite a big jump in demand for oil that the EIA could not account for….Our imports of crude oil fell by an average of 183,000 barrels per day to an average of 6,434,000 barrels per day, after falling by an average of 85,000 barrels per day over the prior week, while our exports of crude oil fell by 1,314,000 barrels per day to average 2,708,000 barrels per day, which when used to offset our imports, meant that the net of our trade in oil worked out to a net import average of 3,726,000 barrels of oil per day during the week ending April 5th, 1,131,000 more barrels per day than the net of our imports minus our exports during the prior week. At the same time, transfers to our oil supply from Alaskan gas liquids, from natural gasoline, from condensate, and from unfinished oils averaged 393,000 barrels per day, while during the same week, production of crude from US wells was unchanged at 13,100,000 barrels per day. Hence our daily supply of oil from the net of our international trade in oil, from transfers, and from domestic well production appears to have averaged a rounded total of 17,219,000 barrels per day during the April 5th reporting week…
Meanwhile, US oil refineries reported they were processing an average of 15,782,000 barrels of crude per day during the week ending April 5th, an average of 115,000 fewer barrels per day than the amount of oil that our refineries reported they were processing during the prior week, while over the same period the EIA’s surveys indicated that an average of 919,000 barrels of oil per day were being added to the supplies of oil stored in the US… So, based on that reported & estimated data, the crude oil figures provided by the EIA for the week ending April 5th appear to indicate that our total working supply of oil from net imports, from transfers, and from oilfield production was 518,000 barrels per day more than what what was added to storage plus our oil refineries reported they used during the week…To account for that difference between the apparent supply of oil and the apparent disposition of it, the EIA just plugged a [-518,000] barrel per day figure onto line 16 of the weekly U.S. Petroleum Balance Sheet, in order to make the reported data for the supply of oil and for the consumption of it balance out, a fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there was an error or omission of that magnitude in the week’s oil supply & demand figures that we have just transcribed…Moreover, since 360,000 barrels of oil supply per day could not be accounted for in the prior week’s EIA data, that means there was a 878,000 barrel per day difference between this week’s oil balance sheet error and the EIA’s crude oil balance sheet error from a week ago, and hence the changes to supply and demand from that week to this one that are indicated by this week’s report are off by that much, and therefore useless…however, since most oil traders react to these weekly EIA reports as if they were accurate, and since these weekly figures therefore often drive oil pricing (as is obvious to anyone who watches oil prices), and hence decisions to drill or complete oil wells, we’ll continue to report this data just as it’s published, and just as it’s watched & believed to be reasonably reliable by most everyone in the industry…(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer….there is also an aging twitter thread from an EIA administrator addressing these ongoing weekly errors, and what they had hoped to do about it)
This week’s average 919,000 barrel per day increase in our overall crude oil inventories came as an average of 834,000 barrels per day were being added to our commercially available stocks of crude oil, while an average of 85,000 barrels per day were being added to our Strategic Petroleum Reserve, the eighteenth SPR increase in twenty-five weeks, following nearly continuous withdrawals over the prior 39 months… Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports rose to 6,508,000 barrels per day last week, which was 4.8% more than the 6,208,000 barrel per day average that we were importing over the same four-week period last year. This week’s crude oil production was reported to be unchanged at 13,100,000 barrels per day because the EIA’s rounded estimate of the output from wells in the lower 48 states was unchanged at 12,700,000 barrels per day, while Alaska’s oil production was 5,000 barrels per day higher at 436,000 barrels per day, but still added the same 400,000 barrels per day to the EIA’s rounded national total as it did last week…US crude oil production had reached a pre-pandemic high of 13,100,000 barrels per day during the week ending March 13th 2020, so this week’s reported oil production figure matches that of our pre-pandemic production peak, and is also 35.1% above the pandemic low of 9,700,000 barrels per day that US oil production had fallen to during the third week of February of 2021.
US oil refineries were operating at 88.3% of their capacity while processing those 15,782,000 barrels of crude per day during the week ending April 5th, down from their 88.6% utilization rate of a week earlier, and a below normal operating rate for early April, as US refineries have lagged normal operating rates since arctic cold penetrated to the Gulf Coast in mid January and froze off some operations… the 15,782,000 barrels of oil per day that were refined this week were 1.7% more than the 15,585,000 barrels of crude that were being processed daily during week ending April 7th of 2023, but 2.0% less than the 16,100,000 barrels that were being refined during the prepandemic week ending April 5th, 2019, when our refinery utilization rate was also at a below normal 87.5%..
With the decrease in the amount of oil being refined this week, gasoline output from our refineries was somewhat lower, decreasing by 538,000 barrels per day to 9,442,000 barrels per day during the week ending April 5th, after our refineries’ gasoline output had increased by 767,000 barrels per day during the prior week. This week’s gasoline production was 1.2% less than the 9,557,000 barrels of gasoline that were being produced daily over week ending April 7th of last year, and 7.1% less than the gasoline production of 10,169,000 barrels per day during the prepandemic week ending April 5th, 2019….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 33,000 barrels per day to 4,639,000 barrels per day, after our distillates output had decreased by 208,000 barrels per day during the prior week. After seven production increases in the past eight weeks, our distillates output was 1.2% more than the 4,583,000 barrels of distillates that were being produced daily during the week ending April 7th of 2023, but 7.9% less than the 5,038,000 barrels of distillates that were being produced daily during the week ending April 5th, 2019…
Even with this week’s decrease in our gasoline production, our supplies of gasoline in storage at the end of the week rose for the second time in ten weeks, increasing by 715,000 barrels to 228,531,000 barrels during the week ending April 5th, after our gasoline inventories had decreased by 4,256,000 barrels during the prior week. Our gasoline supplies rose this week because the amount of gasoline supplied to US users fell by 624,000 barrels per day to 8,612,000 barrels per day, and because our imports of gasoline rose by 242,000 barrels per day to 730,000 barrels per day, while our exports of gasoline rose by 115,000 barrels per day to 978,000 barrels per day.…After thirty-one gasoline inventory withdrawals over the past fifty-two weeks, our gasoline supplies were still 2.8% above last April 7th’s gasoline inventories of 222,245,000 barrels, but were about 3% below the five year average of our gasoline supplies for this time of the year…
With this week’s increase in our distillates production, our supplies of distillate fuels rose for 3rd time in twelve weeks, following eight consecutive prior increases, increasing by 1,659,000 barrels to 117,728,000 barrels over the week ending April 5th, after our distillates supplies had decreased by 1,268,000 barrels during the prior week. Our distillates supplies rose this week because the amount of distillates supplied to US markets, an indicator of our domestic demand, fell by 510,000 barrels per day to 2,985,000 barrels per day, and because our imports of distillates rose by 59,000 barrels per day to 163,000 barrels per day, even as our exports of distillates rose by 184,000 barrels per day to an eighteen month high of 1,580,000 barrels per day.…Even with 30 inventory decreases over the past fifty-two weeks, our distillates supplies at the end of the week were 4.7% above the 112,445,000 barrels of distillates that we had in storage on April 7th of 2023, but were about 5% below the five year average of our distillates inventories for this time of the year…
Finally, after our exports of crude oil dropped by nearly a third, our commercial supplies of crude oil in storage rose for the 17th time in twenty-six weeks and for the 24th time in the past year, increasing by 5,841,000 barrels over the week, from 451,417,000 barrels on March 29th to 457,258,000 barrels on April 5th, after our commercial crude supplies had increased by 3,210,000 barrels over the prior week… With this week’s increase, our commercial crude oil inventories remained about 2% below the most recent five-year average of commercial oil supplies for this time of year, but were 31.8% above the average of our available crude oil stocks as of the first weekend of April over the 5 years at the beginning of the past decade, with the big difference between those comparisons arising because it wasn’t until early 2015 that our oil inventories had first topped 400 million barrels. After our commercial crude oil inventories had jumped to record highs during the Covid lockdowns of the Spring of 2020, then jumped again after February 2021’s winter storm Uri froze off US Gulf Coast refining, but then fell due to higher exports relating to the Ukraine war, only to jump again following the Christmas 2022 refinery freeze offs, our commercial crude supplies as of this April 5th were still 2.8% less than the 470,549,000 barrels of oil left in commercial storage on April 7th of 2023, but were 10.9% more than the 412,371,000 barrels of oil that we still had in storage on April 8th of 2022, while still 8.2% less than the 498,313,000 barrels of oil we had in commercial storage on April 9th of 2021, after refinery damage from winter storm Uri left even more crude oil remaining after 2020’s pandemic precautions had left a glut of oil unused…
This Week’s Rig Count
In lieu of a detailed report on the rig count, we are again just including a screenshot of the rig count summary from Baker Hughes…in the table below, the first column shows the active rig count as of April 12th, the second column shows the change in the number of working rigs between last week’s count (April 5th) and this week’s (April 12th) count, the third column shows last week’s April 5th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running on the Friday before the same weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting period a year ago, which in this week’s case was the 14th of April, 2023…
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