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Weekly Petroleum Status Report – 1/25/17

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US crude oil stocks increased by 2.8 MMBbl last week. Gasoline inventories increased by 6.8 MMBbl and distillate inventories increased by 0.1 MMBbl respectively. Yesterday afternoon, API had reported a crude oil build of 2.4 MMBbl alongside builds of 4.85 MMBbl for gasoline and 1.95 MMBbl for distillate inventories respectively. Analysts had expected a crude oil build of 2.7 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a significant increase of 8.9 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.

US production was estimated to be up 17 MBbl/d (almost all from Alaska) from last week per EIA’s estimate. Imports were down 568 MBbl/d last week to an average of 7.8 MMBbl/d. Refinery inputs averaged 16.0 MMBbl/d (421 MBbl/d less than last week), leading to a utilization rate of 88.3%. The petroleum stocks report is bearish, due to the large total petroleum inventories build. All products except for propane posted a build last week. WTI prices are down $0.07/Bbl, trading at $53.11/Bbl at the time of writing.

Table 1-20-2017

WTI prices continue to trade in the $50-55/Bbl range, with the market weighing bullish comments from OPEC and non-OPEC countries regarding the production cuts and bearish signs from the potential of US shale production. Following the meeting of the quota compliance committee on the weekend, Saudi oil minister Khalid al-Falih stated that 1.5 MMBbl/d out of the proposed 1.8 MMBbl/d of the quotas had already been met through cuts. However, the market remains cautious, as fundamental supply data from a third party source is not yet available. Analysts do not expect full compliance from the quota carrying nations. Within the last week, comments from the EIA, IEA, and OPEC have all talked about the potential of US shale production this year with rising prices and rig counts. The potential for US shale production to offset declines from production cuts has placed a ceiling on prices. Additionally, the rising production from Libya and the potential for Nigerian production to come back online after infrastructure is fixed (following attacks by the Niger Delta Avengers), adds further bearish sentiment into the market. Libya said today that the country is currently producing 700 MBbl/d (almost triple what it was producing in summer 2016) and plans to reach 1.25 MMBbl/d of production by year end. President Trump’s stance on Keystone XL and DAPL along with the proposed Border Tax Adjustment (BTA) are also on the radar as the market sorts through what this would all mean for commodity flows globally. Drillinginfo still expects prices to stay rangebound between $50-$55/Bbl in the short term. Any move in prices out of the range will be underpinned by data or news regarding the success of the implementation of OPEC quotas.

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.