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Weekly Petroleum Status Report – 5/24/2017

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US crude oil stocks decreased by 4.4 MMBbl last week, alongside gasoline and distillate withdrawals of 0.8 MMBbl and 0.5 MMBbl respectively. Yesterday afternoon, API had reported a crude oil withdrawal of 1.5 MMBbl while reporting gasoline and distillate withdrawals of 3.15 MMBbl and 1.85 respectively. Analysts had expected a crude withdrawal of 2.3 MMBbl. The most important number to keep an eye on, total petroleum inventories, posted a decrease of 3.5 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.

US production was estimated to be up 15 MBbl/d from last week per EIA’s estimate. Imports were down 296 MBbl/d last week to an average of 8.3 MMBbl/d. Refinery inputs averaged 17.3 MMBbl/d (159 MBbl/d more than last week), leading to a utilization rate of 93.5%. The petroleum stocks report is bullish, due to sizeable withdrawals in crude oil and total petroleum inventories. WTI prices are up $0.22/Bbl to $51.69/Bbl at the time of writing.

WTI prices have been trading in the $49-51/Bbl range. The recent rally seen in prices is due to the bullish API report from yesterday as well as expectations firming around a nine-month extension on OPEC cuts. Saudi Arabian energy minister Khalid al-Falih flew to Baghdad on Monday in efforts to convince Iraq to join in for the nine-month cut extension. Khalid al-Falih’s efforts seemed to have paid off as Iraqi oil minister Jabar Ali al-Luaibi on Monday said he agreed with Saudi Arabia for a nine-month cut extension. Saudi Arabia’s efforts in rallying OPEC producers to help reduce global oil inventories to their five-year average is helping the bullish sentiment ahead of the May 25th Vienna meeting. In order to normalize inventories back to levels from prior to the price crash, full compliance from OPEC members for the extended quota period in conjunction with expected demand growth (1.33 MMBbl/d per IEA) will be necessary. However, the relentlessly increasing US rig count and possible growth from Libya and Nigeria continue to keep a lid on prices. Should OPEC’s decision on Thursday drive prices higher, US production could increase even further. DrillingInfo expects WTI prices to remain in the $49-$52/Bbl range until the meeting. Longer term prices will be shaped by the outcome of the OPEC meeting tomorrow and its effects on the stubbornly high global inventories, especially during the high demand summer season.

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.