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Weekly Petroleum Stocks – 11/23/16

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US crude oil stocks decreased by 1.3 MMBbl last week. Gasoline and distillate inventories increased by 2.3 MMBbl and 0.3 MMBbl respectively. Yesterday afternoon, API had reported a crude oil and distillate withdrawal of 1.28 MMBbl and 0.35 MMBbl respectively alongside a 2.68 MMBbl gasoline build. Analysts had expected builds of 1.0 MMBbl/d and 0.9 MMBbl/d in crude oil and gasoline stocks respectively. The most important number to keep an eye on, total petroleum inventories, posted a decrease of 0.1 MMBbl. For a summary of the crude oil and petroleum product stock movements, see table below.

US production was estimated to be up 9 MBbl/d from last week per EIA’s estimate. Imports were down 0.845 MMBbl/d last week to an average of 7.6 MMBbl/d. Refinery inputs averaged 16.4 MMBbl/d (271 MBbl/d more than last week), leading to a utilization rate of 90.8%. The petroleum stocks report is neutral as it came within expectations of API and analysts. Prompt month WTI prices were up following the report, but came down shortly after and currently trading at $47.93/Bbl.

table-11-23-2016

Crude oil prices rose at the beginning of the week with reports that OPEC was close to agreeing on the details of a cut. Crude oil gave back some of its gains on Tuesday amidst reports that Iran and Iraq were not on board with the proposed agreement. OPEC is said to be targeting a 4-4.5% cut from current output levels. Additionally, Libya and Nigeria have been kept exempt from the cuts, due to currently lower production caused by militant fighting and terrorist activity. However, the deal still hinges on Iran and Iraq agreeing to participate. Recent reports have suggested that Iran has been offered a deal to cap production at current levels, which would fall short of the 4-4.2 MMBbl/d production levels Iran has pledged to reach since the lifting of the sanctions. Iraq has also previously asked to be exempt from the quotas, as they defend that they need the revenues from oil sales to continue fighting ISIS. The market largely expects the announcement of a deal on November 30th, as the lack of one would destroy the credibility of OPEC. However, it remains to be seen if they can agree on quotas at the country level or if they will target a ceiling level for the whole cartel’s output. Any initial price gains from the announcement of an agreement are likely to be capped until the cartel proves that they can comply with their own quotas, as there have been “cheaters” in the past. Until the OPEC dilemma is resolved on November 30th, trade will remain volatile around the perceived likelihood of the deal and the members’ willingness to comply.

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.