This Week in Petroleum 5-30-07

2nd Update:

The data have been released:

Summary of Weekly Petroleum Data for the Week Ending May 25, 2007

As I have been predicting, this was an all-time record low gasoline inventory for Memorial Day Weekend. This is 2.7 million barrels lower than the previous low inventory mark for Memorial Day. Woo-hoo?

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) fell by 2.0 million barrels compared to the previous week. At 342.2 million barrels, U.S. crude oil inventories are at the upper end of the average range for this time of year. Total motor gasoline inventories increased by 1.3 million barrels last week, but remain well below the lower end of the average range. Distillate fuel inventories inched higher by 0.1 million barrels per day, and are below the upper end of the average range for this time of year.

Despite the high prices, demand is still exceptionally high:

Over the last four weeks, motor gasoline demand has averaged over 9.4 million barrels per day, or 1.4 percent above the same period last year. Distillate fuel demand has averaged nearly 4.2 million barrels per day over the last four weeks, up 2.9 percent compared to the same period last year. Jet fuel demand is up 0.1 percent over the last four weeks compared to the same four-week period last year.

Imports, of both crude and gasoline remain very strong:

U.S. crude oil imports averaged over 10.0 million barrels per day last week, down 874,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged nearly 10.6 million barrels per day, or 395,000 barrels per day more than averaged over the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.6 million barrels per day, the third highest weekly average ever. Distillate fuel imports averaged 198,000 barrels per day last week.

If gasoline imports hadn’t been so strong (also something I have been predicting) then we could have actually seen a draw this week. If imports had been at last week’s level – which was itself pretty healthy – we would have seen nearly a 1 million barrel draw on gasoline stocks. That would have likely set the market back on fire, and demonstrates just how dependent summer prices are on gasoline imports. But as I wrote last week:

While refiners are certainly making good profits from the recent rise, another result is that foreign refiners will want to get a piece of the action. As I commented a few weeks back, I can hear them scrambling to fill tankers to get the product to the U.S. Imports last week had increased by 700,000 barrels per day over the low point in February. I expect that trend to continue, and imports to start taking some of the pressure off of gasoline prices pretty soon.

It certainly appears the exporters are responding to the price. We are feeling it in Europe as well, as prices have been climbing here.

Update: Yesterday, I posted that prices may soon mitigate, and then gasoline futures took a huge drop:

Front month June Gasoline futures fell over 10 cents a gallon, as analysts are looking for another storage build in Gasoline last week. Current estimates are for a gain of 1.2 million barrels of Gasoline last week, which if true would be the 4th consecutive week of increased storage.

I had no idea I had such a powerful influence on the market. ๐Ÿ™‚

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Ahead of the report, I will reiterate the prediction I made before the release of the May 16th report that “we will hit Memorial Day with record low inventory levels.” I think we are likely to see another gasoline build, but no way are we going to close the 4 million barrel gap that would be required to keep us out of the record books.

Unless we see a surprising draw, I think gasoline prices are going to bounce around in this range for the next month or so. If we can claw our way out of this hole over the next month (I still expect imports, at these prices, to remain strong) then prices may mitigate. If we don’t make up a lot of room prior to the really high demand season in July and August, then we haven’t see the highs for gasoline yet.

I will update this after the release of tomorrow’s Thursday’s report. As was pointed out in the comments, this week’s report will be delayed a day due to Memorial Day. So, on Thursday we will find out if this Memorial Day saw record low gasoline inventories.

18 thoughts on “This Week in Petroleum 5-30-07”

  1. Just FYI – due to the holiday on monday, the EIA report will not be released until thursday the 31st at 10:30am.

    Have enjoyed this blog for some time, keep up the good work!

  2. Just FYI – due to the holiday on monday, the EIA report will not be released until thursday the 31st at 10:30am.

    Yeah, I forgot all about that. Of course, I am in Scotland so Monday wasn’t a holiday for me. That threw me off a bit.

    I will correct the essay.

    Cheers, Robert

  3. Check out a certain CEO’s appearance on the Today Show this morning. I think he did a pretty fair job.

    Mulva says high gas prices because of demand

    The annual profit graphic was a bit unfair. A big chunk of the improved profits come from cost reductions and paying off debt. Plus $15.6 billion in profit is not out of line for a company worth $125 billion in market capitalization.

    Same with the crack about only spending 1% on research on global warming. You can’t just crank up research – companies need time to staff up and change priorities. Funding university research and partnerships are usually the way to go in the early years.

  4. Thanks for that link. I had my wife record it, but now I can tell her to delete it – after she watches it; I will quiz her just to be sure she watched it. ๐Ÿ™‚

  5. Robert – you need one of these:

    Slingbox A/V

    You can watch US TV over your broadband connection. I would have loved it when I lived in the UK. For about $110 you can get a Sling Tuner that connects to analog cable or even an antenna. It works fine even through corporate firewalls.

  6. I have heard of these. My wife would love this. Myself, I almost never watch TV. I sometimes go 2 or 3 weeks without even turning it on.

    But, the wife and kids might really enjoy that. I will look into it.

    Cheers, Robert

  7. Don’t watch too much TV myself. I like football in the fall and watch “24”, but that is about it. More likely I have the TV tuned to a 24-hour news channel. Wife and kids watch a lot.

    Find a relative with a broadband connection in the US and you are all set. I have a Slingox connected to a satellite digital video recorder. It works great.

  8. Let me ask you some questions about it. I don’t have any relatives with broadband. That may be a problem.

    If I have it attached to someone’s TV in the U.S., am I limited to watching what they are watching? Or can I watch something different? Does their TV have to physically be turned on?

    I would love to be able to watch football from here. In fact, I would love it so much that I will pay for a relative’s broadband if they will let me set up the box.

    Thanks for this tip. My wife is going to be very, very happy.

  9. I would love to be able to watch football from here. In fact, I would love it so much that I will pay for a relative’s broadband if they will let me set up the box.
    When in Rome…

    Try watching some rugby, Robert. For the spectator it is the king of all “footballs”: non-stop, hard-hitting, there is a build up. And they don’t have a commisioner that changes the rules after every game because he did not like the way so-and-so celebrated a touch-down. Rules are pretty straight forward. Just wait out the scrums and rucks until you figure those out…

  10. Try watching some rugby, Robert.

    I went to a game in Edinburgh a couple of months ago – Scotland versus Italy. It was a lot of fun, except Scotland got thumped.

  11. Robert – The way Slingox works is it takes the video and audio signals from a set top box (satellite or cable) and converts it to a stream that can be transmitted over the internet. The video can be any source, TV, DVD, video camera, whatever. No the TV doesn’t have to be on to use it. If the video source you are using is connected to a TV that someone is watching, then yes, you have to watch the same thing.

    Slingbox also transmits IR signals over the internet so that you can control the device remotely. The video is suprisingly good. Sling varies the bandwith to match the video stream.

    Lots of people connect their Slingboxes to TIVO devices. That way they can record and time shift events. I know of some ex-pats that do this. With the 6 hour time difference, you would be watching TV usually at a different time than whoever is hosting you.

    Slingbox tuner has a built in ATSC tuner, so all you neeed to do is hook it to an antennae or cable and you can start watching TV over the internet.

  12. Not to distract from talk about television and sports, both of which I love (as is probably obvious from the beginnings of TWIP), I would attribute much of the decline in the near-month futures price for RBOB in that the contract expires today (May 31). There was a lot of backwardation between the first and second month contracts, so as the June contract goes away, it will naturally drift closer to the July contract.

  13. Doug – I didn’t know there WAS anything more important than Sooner football.

    Looking forward to TWIP today. Retail prices here in Houston are holding steady at 2.95-2.99. I have not yet paid more than $3. My friends in retail tell me they are losing money on credit card sales of gasoline at the flagship station accross the street (1.97% discount plus $.10/transaction). But there is a psychological barrier to going over $3.

    I remember back in 1981 packing up my ’69 Mustang with all my worldly possessions and heading out to the oil fields of West Texas. Paid $1.10 a gallon for leaded gasoline. My SUV gets better gas mileage and pollutes less. $3 isn’t so bad. Making gasoline in the good old days was a lot easier, we just spiked NGL condensates with 3 grams/gallon of TEL and we were good to go.

  14. Kingofkaty,

    I knew there was at least one person in the US that hadn’t yet paid more than $3 per gallon and I’m happy to meet you! Seriously, I can’t remember the last time I paid less than $3 per gallon. But then you probably live in the only part of the country that has worse humidity than the DC area!

    I hope TWIP lives up to expectations this week. I can tell you that I don’t quote Shakespeare this week.

  15. Doug – I didn’t know there WAS anything more important than Sooner football.

    Did you say Sooner football? Dude, I grew up in Oklahoma. The Sooners have been my team since I was old enough to talk. I admit that going to school at A&M and rooting for the Sooners put me in a bit of a minority, but there were a couple of other huge Sooner fans in grad school with me.

    My favorite sports teams: Sooners, Dallas Cowboys, Dallas Mavericks, Texas Rangers. Of course I also root for A&M, but it seems like we are never playing for big prizes.

    Cheers, Robert

  16. Robert,

    Thanks for the plug and kind words regarding TWIP and EIA’s site!

    Doug MacIntyre

    P.S. That was kingofkaty that is the Sooner fan. I was born and raised in Maryland and went to U of MD.

  17. Yes, that was me. I married into the Crimson & Creme. My undergrad is from Kansas State and masters from U. of Tulsa. OK is my adopted home state – became a Sooner football fan when Bob Stoops took over.

    Do they play college football at Maryland? Just kidding. The Terps went 9-4 in the ACC, not too bad.

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