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Crude Stocks Down, Prices Up

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US crude oil stocks decreased by 7.6 MMBbl last week. Gasoline inventories decreased by 1.6 MMBbl, while distillate stocks increased by 3.1 MMBbl. Yesterday afternoon, API had reported a crude oil and gasoline withdrawal of 8.1 MMBbl and 0.8 MMBbl respectively, alongside a distillate build of 2.1 MMBbl. Analysts had expected a more modest crude withdrawal of 2.9 MMBbl alongside gasoline and distillate builds of 1.1 MMBbl each. The most important number to keep an eye on, total petroleum inventories, decreased by 3.9 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.

US production was estimated to be up 59 MBbl/d from last week per EIA’s estimate. Imports were down by 132 MBbl/d last week to an average of 7.6 MMBbl/d. Refinery inputs averaged 17.2 MMBbl/d (103 MBbl/d more than last week), leading to a utilization rate of 94.5%. The report is bullish due to a larger than anticipated crude withdrawal, surprise gasoline withdrawal, and the sizeable total stocks withdrawal. The increase in US production and distillate inventories can be interpreted a bearish, but the declining trend in total crude oil and petroleum inventories is decidedly bullish. WTI prices are up $1.25/Bbl to $46.29/Bbl at the time of writing.

Oil prices were up on Tuesday after the EIA revised its US oil production forecast for 2018 down to an annual average of 9.9 MMBbl/d from 10.0 MMBbl/d citing their lower price expectations for crude for the balance of 2017 and in 2018. There was also speculation that Nigeria and Libya may curb output following their invite to attend the OPEC quota monitoring committee meeting on July 24th in Moscow. Additionally, Euroilstock data showed crude oil intake increased and stocks of refined products decreased in June, adding to the bullish sentiment about the start of high demand season. On the bearish side, OPEC’s monthly report (released Wednesday) showed that OPEC production rose 393 MBbl/d in June to 32.611 MMBbl/d led by increases from Nigeria and Libya (exempt from quotas) alongside additional barrels from Saudi Arabia and Iraq. The IEA monthly report will be released tomorrow and their comments regarding the current balance will be closely watched by the market. Rising OPEC and US production continues to keep a lid on prices. As stated here previously, without continued high compliance with production quotas and the realization of the demand growth projected by IEA, there is little chance for the global market to normalize inventories and provide an environment for higher prices. Drillinginfo expects WTI prices to trade in the mid-$40/Bbl range in the short term as the market comes to grips with whether the implied deficit will continue to prompt global inventory normalization. Until global inventories start to decline continuously, longer term price advances will be limited.

Please find the updated Drillinginfo charts on the link below:
Petroleum Stocks Chart

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Sarp is Senior Director of Power & Renewables Analytics at Enverus. He has research and modeling experience in the upstream, downstream and power markets and has presented his work at various academic conferences around the world, including those organized by the SPE and the IAEE. He has also been published in the SPE Economics & Management Journal for his work on the long-term economic viability of production from unconventional liquids-rich reservoirs. Sarp’s focus on data-driven modeling and his ability to incorporate the effects of technological and market advances into analyses provides clients a thorough picture of the present and the future in their area of interest within the oil and gas industry. Sarp holds a Master of Science in Mineral and Energy Economics from the Colorado School of Mines, a Master of Science in Petroleum Economics and Management from the Institut Francais du Petrole (IFP School), and a Bachelor of Arts in Economics from the University of Chicago.