Oil and SPR at 13 & 19 Year Lows, Total Oil + Product Supply Down
Commenter RJS: US oil supplies at a 13 year low, SPR at a 19 year low: total oil + products supplies at a 7 1/2 year low, distillate supplies at 26 month low after refinery freeze off
The Latest US Oil Supply and Disposition Data from the EIA
US oil data from the US Energy Information Administration for the week ending February 11th indicated that after a big drop in our oil exports, a major slowdown in our oil refining due to freezing weather on the Gulf Coast, and a big withdrawal of oil from our Strategic Petroleum Reserve, we had oil left to add to our stored commercial crude supplies for the third time in 12 weeks and for the 13th time in the past thirty-eight weeks . . . our imports of crude oil fell by an average of 599,000 barrels per day to an average of 5,790,000 barrels per day, after falling by an average of 696,000 barrels per day during the prior week, while our exports of crude oil fell by an average of 829,000 barrels per day to an average of 2,271,000 barrels per day during the week, which together meant that our effective trade in oil worked out to a net import average of 3,519,000 barrels of per day during the week ending February 11th, 230,000 more barrels per day than the net of our imports minus our exports during the prior week . . . over the same period, production of crude oil from US wells was reportedly unchanged at 11,600,000 barrels per day, and hence our daily supply of oil from the net of our international trade in oil and from domestic well production appears to have totaled an average of 15,119,000 barrels per day during the cited reporting week…
Meanwhile, US oil refineries reported they were processing an average of 14,902,000 barrels of crude per day during the week ending February 11th, an average of 675,000 fewer barrels per day than the amount of oil than our refineries processed during the prior week, while over the same period the EIA’s surveys indicated that a net of 224,000 barrels of oil per day were being pulled out the supplies of oil stored in the US . . . so based on that reported & estimated data, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from storage, and from oilfield production was 441,000 barrels per day more than what our oil refineries reported they used during the week…to account for that disparity between the apparent supply of oil and the apparent disposition of it, the EIA just inserted a (-441,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a balance sheet fudge factor that they label in their footnotes as “unaccounted for crude oil”, thus suggesting there must have been an error or omission of that magnitude in this week’s oil supply & demand figures that we have just transcribed . . . however, since most everyone treats these weekly EIA reports as gospel and since these figures often drive oil pricing, 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 accurate 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)….
This week’s 224,000 barrel per day decrease in our overall crude oil inventories left our total oil supplies at 996,336,000 barrels, now the lowest since November 7th, 2008, and therefore at a new 13 year low…this week’s oil inventory decrease came as 160,000 barrels per day were being added to our commercially available stocks of crude oil, while 384,000 barrels per day of oil were being pulled out of our Strategic Petroleum Reserve, part of the Biden’ administration plan to release 50 million barrels from the SPR to incentivize US gasoline consumption . . . including other withdrawals from the Strategic Petroleum Reserve under similar programs, a total of 71,319,000 barrels have been removed from the Strategic Petroleum Reserve over the past 18 months, and as a result the 584,828,000 barrels of oil now left in our Strategic Petroleum Reserve is now the lowest since September 20th, 2002, or at yet another new 19 year low, as repeated tapping of our emergency supplies for political reasons or to “pay for” other programs has already drained those supplies considerably over the past dozen years . . . based on an estimated prepandemic consumption level of around 18 million barrels per day, the US would have roughly 30 1/2 days of oil supply left in the Strategic Petroleum Reserve when the Biden program is complete…
Further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 6,375,000 barrels per day last week, which was still 9.3% more than the 5,831,000 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 11,600,000 barrels per day as the EIA’s rounded estimate of the output from wells in the lower 48 states was unchanged at 11,100,000 barrels per day, while Alaska’s oil production was 6,000 barrels per day higher at 461,000 barrels per day but had no impact on the rounded national production total . . . 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 was 11.5% below that of our pre-pandemic production peak, but 37.6% above the interim low of 8,428,000 barrels per day that US oil production had fallen to during the last week of June of 2016…
US oil refineries were operating at 85.3% of their capacity while using those 14,902,000 barrels of crude per day during the week ending February 11th, down from a utilization rate of 88.2% the prior week, and lower than the historical utilization rate for early February refinery operations . . . the 14,902,000 barrels per day of oil that were refined this week were just 0.6% more barrels than the 14,819,000 barrels of crude that were being processed daily during the pandemic impacted week ending February 12th of 2021, and 8.2% less than the 16,210,000 barrels of crude that were being processed daily during the week ending February 14th, 2020, when US refineries were operating at what was then a closer to normal 89.4% of capacity…
With the big decrease in oil being refined this week, gasoline output from our refineries was also much lower, decreasing by 560,000 barrels per day to 8,830,000 barrels per day during the week ending February 11th, after our gasoline output had increased by 740,000 barrels per day over the prior week.…this week’s gasoline production was 2.2% less than the 9,031,000 barrels of gasoline that were being produced daily over the same week of last year, and 7.3% less than the gasoline production of 9,525,000 barrels per day during the week ending February 14th, 2020 . . . at the same time, our refineries’ production of distillate fuels (diesel fuel and heat oil) decreased by 244,000 barrels per day to 4,455,000 barrels per day, after our distillates output had increased by 97,000 barrels per day over the prior week . . . with that decrease, our distillates output was 2.6% less than the 4,574,000 barrels of distillates that were being produced daily during the week ending February 12th of 2021, and 8.2% less than the 4,852,000 barrels of distillates that were being produced daily during the week ending February 14th, 2020…
With the big decrease in our gasoline production, our supplies of gasoline in storage at the end of the week fell for the fourth time in the past 12 weeks, decreasing by 1,332,000 barrels to 248,393,000 barrels during the week ending February 11th,after our gasoline inventories had decreased by 1,644,000 barrels over the prior week . . . our gasoline supplies decreased again this week even though the amount of gasoline supplied to US users decreased by 556,000 barrels per day to 8,570,000 barrels per day, while our imports of gasoline rose by 41,000 barrels per day to 555,000 barrels per day, and while our exports of gasoline rose by 133,000 barrels per day to 439,000 barrels per day . . . after this week’s decrease, our gasoline supplies were 3.9% lower than last February 12th’s gasoline inventories of 257,084,000 barrels, and are now about 3% below the five year average of our gasoline supplies for this time of the year…
Meanwhile, with this week’s decrease in our distillates production, our supplies of distillate fuels decreased for the seventeenth time in twenty-four weeks, falling by 1,552,000 barrels to a twenty six month low of 120,262,000 barrels during the week ending February 11th, after our distillates supplies had decreased by 930,000 barrels during the prior week . . . our distillates supplies fell again this week as the amount of distillates supplied to US markets, an indicator of our domestic demand, rose by 25,000 barrels per day to 4,321,000 barrels per day, and as our exports of distillates fell by 182,000 barrels per day to 794,000 barrels per day, while our imports of distillates fell by 3,000 barrels per day to 437,000 barrels per day . . . after thirty-one inventory decreases over the past forty-five weeks, our distillate supplies at the end of the week were 23.7% below the 157,684,000 barrels of distillates that we had in storage on February 12th of 2021, and about 19% below the five year average of distillates inventories for this time of the year…
Meanwhile, after the drop in our oil exports, the pullback in our oil refining, and a big withdrawal of oil from our Strategic Petroleum Reserve, our commercial supplies of crude oil in storage rose for the 10th time in 28 weeks and for the 19th time in the past year, increasing by 1,121,000 barrels over the week, from 410,387,000 barrels on February 4th to 411,508,000 barrels on February 11th, after our commercial crude supplies had decreased by 4,756,000 barrels over the prior week . . . after this week’s increase, our commercial crude oil inventories remained about 10% below the most recent five-year average of crude oil supplies for this time of year, but were still about 28% above the average of our crude oil stocks as of second weekend of February over the 5 years at the beginning of the past decade, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first topped 400 million barrels….since our crude oil inventories had jumped to record highs during the Covid lockdowns of spring 2020 and remained elevated for most of a year after that, our commercial crude oil supplies as of this February 11th were 10.9% less than the 461,757,000 barrels of oil we had in commercial storage on February 12th of 2021, and are now 7.1% less than the 442,883,000 barrels of oil that we had in storage on February 14th of 2020, and also 9.5% less than the 454,512,000 barrels of oil we had in commercial storage on February 15th of 2019…
Finally, with our inventory of crude oil and our supplies of all products made from oil all near multi year lows, we are continuing to track the total of all U.S. Stocks of Crude Oil and Petroleum Products, including those in the SPR . . . the EIA’s data shows that the total of our oil and oil product inventories, including those in the Strategic Petroleum Reserve and those held by the oil industry, and thus including everything from gasoline and jet fuel to propane/propylene and residual fuel oil, fell by 12,577,000 barrels this week, from 1,758,364,000 barrels on February 4th to 1,745,787,000 barrels on February 11th….that leaves our total supplies of oil & its products now at the lowest since May 2nd, 2014, or at a new seven and a half year low, despite the recent near record increase in gasoline inventories….
in re my “distillate supplies at 26 month low” subheader:
Low distillate stocks at mid-year would leave refiners racing to rebuild them before the next winter heating season.
To avoid this scenario, refiners will have to process much more crude and/or reconfigure their equipment to boost the production of mid-distillates such as diesel and jet fuel at the expense of light distillates such as gasoline.
But gasoline inventories are already 6 million barrels (-2.5%) below the pre-pandemic seasonal average, limiting the scope to squeeze them to rebuild distillate stocks by changing downstream processing.
The shortage of distillate is bleeding into the gasoline market, driving up prices there to ensure refiners have an incentive to continue making gasoline rather than switching over to diesel.
As a result, the only way for refiners to rebuild depleted distillate stocks will be processing more crude over the next six to nine months, boosting output of both light and medium distillates.
The implied increase in refiners’ demand is likely to tighten global crude inventories even further and continue exerting upward pressure on oil prices through September.
After adjusting for inflation, on-road diesel prices including taxes are at their highest for the time of year since 2014, averaging more than $4 per gallon (equivalent to $168 per barrel).
But prices might need to rise much further to restrain consumption and avoid inventories falling to critically low levels.
In the first half of 2008, the shortage of distillate contributed to the rise in Brent to a record $148 per barrel by July (equivalent to $187 today after adjusting for inflation).
In the first half of 2022, the rising cost of both diesel and gasoline is likely to remain a headache for central bankers worried about inflation and elected policymakers worried about falling real wages.
The only way to avoid costs escalating further would be a significant increase in crude production or a reduction in freight demand associated with a slowdown in the manufacturing cycle.
– Global oil inventories are exceptionally tight (Reuters, Feb. 15)
– Diesel is the U.S. economy’s inflation canary (Reuters, Feb. 9)
– Diesel shortage attracts hedge fund attention (Reuters, Feb. 7)
– Depleted U.S. distillate stocks show supply chain pressure (Reuters, Feb. 4)