Updated:
Not too much to get excited about. Those reports of some refineries coming down early for turnarounds due to low margins look to be accurate, given the drop in refinery utilization. That would also explain the rise in crude inventories, but typically you start to see gasoline inventories coming down as the refineries come offline. Gasoline production did fall, as one would expect as turnaround season begins. However, gasoline inventories increased on the back of very strong gasoline import numbers.
The highlights:
Summary of Weekly Petroleum Data for the Week Ending January 18, 2008
U.S. crude oil refinery inputs averaged 14.9 million barrels per day during the week ending January 18, down 91,000 barrels per day from the previous week’s average. Refineries operated at 86.5 percent of their operable capacity last week. Gasoline production moved slightly lower compared to the previous week, averaging about 9.0 million barrels per day. Distillate fuel production fell last week, averaging 4.1 million barrels per day.
U.S. crude oil imports averaged about 10.2 million barrels per day last week, down 233,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged nearly 10.1 million barrels per day, or 0.1 million 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 1.2 million barrels per day. Distillate fuel imports averaged 242,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose by 2.3 million barrels compared to the previous week. At 289.4 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories increased by 5.0 million barrels last week, and are above the upper limit of the average range. Distillate fuel inventories declined by 1.3 million barrels, and are near the middle of the average range for this time of year. Propane/propylene inventories decreased by 3.3 million barrels last week. Total commercial petroleum inventories increased by 2.2 million barrels last week, and are in the middle of the average range for this time of year.
Pre-Release Commentary
This week’s inventory report will be delayed until Thursday due to Monday’s holiday. As we move toward spring, inventory levels will be influenced by 1). Spring turnaround season; and 2). The return of summer gasoline blends. Typically, turnaround season doesn’t really kick off until late February to early-March, but a note from the OPIS report that came out on Wednesday stated “Apparently, the 2008 refinery turnaround season has been launched early, particularly at the U.S. Gulf Coast.” In the face of horrible margins, it makes sense to move turnarounds up and take the outages now, as opposed to later when margins should firm up.
If lots of refiners do push up their turnarounds, we will see crude inventories start to build earlier than normal (which may have already started), and gasoline inventories will start to be pulled down as they were last spring. Gasoline inventories have recovered from the record low levels of last year, and are setting in pretty good shape heading into the turnarounds. Whether we reach $4 gasoline is going to depend on the draw down rate, which last spring was very steep.
Back to the OPIS reports, last Friday’s report contained a very interesting story that I have not seen reported in the media. Here is an excerpt:
A couple of traders and refiners on the U.S. West Coast may have found an outlet for the burgeoning gasoline stocks after fixing two ships to sail to Asia or Australia, industry sources said on Friday.
The West Coast gasoline stocks have reached the highest level since February 2006, prompting some traders to look for outlets in the East Coast in a potentially unprecedented move, and, possibly, the Gulf Coast, Asia, Australia or the west coast of Mexico.
As of Thursday, two ships were booked to load gasoline on the West Coast for delivery to Asia or Australia. Pacific Ruby was booked to load at the end of January, and Wang Chi was fixed to load on Feb. 1. These ships are likely to sail to Singapore or China or Australia.
“Those two vessels were booked earlier this week,” a source said. “A few ships were provisionally booked on Thursday for the same voyage, but all those fixtures failed.”
Good Resources
It goes without saying that the inventory reports from the EIA are must reads every week for me. There are several other resources that I utilize on a daily basis to keep up with what’s going on in the world of energy. One is The Oil Drum, where the important headlines are usually captured in the daily Drumbeat. The daily subscriber reports from OPIS are a very valuable source of information on the energy markets, and they often contain information that I never seen in any publicly available sources. The reports also have daily pricing updates for gasoline (and gasoline blending components), distillates, and ethanol. (I see that spot ethanol prices are headed back up, and are once again higher than spot premium gasoline on the West Coast).
Platts is another good resource that covers a lot of areas that OPIS doesn’t. Platts also has a blog, The Barrel, that usually covers supply/demand issues (and links back to both TOD and my blog). Finally, Rigzone usually keeps me updated on the latest exploration and discovery news. One source that I have available with my company is a daily news summary from various categories such as Energy, Oil, Alternative Energy, etc. Sometimes I spot a story there that I find particularly interesting, and I link to the original source and write about it. Anyway, just wanted to share some of the resources that I find especially useful.
Oil tanking again today. Where is the bottom?
Supplies have adequate all along the big run-up last year, which seems to suggest it was speculation.
Meanwhile, demand for fossil oil is probably declining minutely in 2008, although production seems to be creeping up (sorry, doomsters, the end is not near).
My guess is that the dubious $100 trade we sae for oil in late 2007 (early 2008?) will be the high for a generation. Check out fossil oil prices and demand in the 1980s (BP website). And this go ’round, we have wonderful new technologies for conservation and alternative sources of energy.
If we have a recession, a global recession, look for oil to hit $30 — that would still be three times higher than in 1998.
investors (including myself) often forget that trends can reverse, sometimes for years.
Check out that Dow. Almost back to Clinton-era levels. Sheesh, eiht years w/o appreciation. So much for 11 percent annually compounded growth.
Oil? In 10 years it will cost less than today.
RR- a great list of sources, but forget about TOD.
Bought gas for $2.99 in CA this morning. “Cheap.”
Robert, can you please point me to an earlier post that you may have done somewhere explaining the “turnaround” in refineries and fluctuations in seasonal storage of oil/gas? I’m sure that you posted something like this somewhere at one time or another. Thanks. Tom
Tom,
I have detailed some of what happens in Refining 101: Winter Gasoline. There is also an explanation of why summer gasoline tends to be more expensive.
What happens is in the spring and fall, during the off season, refiners will come down for maintenance. A refinery will do this once a year, or every couple of years. Some do it in the spring, and some in the fall. Prior to coming down, they will build up gasoline and distillate stocks so they can continue to supply customers while they are down. During the turnaround, they may refill their crude oil tanks (assuming they went into the turnaround with low inventories), but you will see their gasoline inventories come down.
Robert, now that you’re UK based, do you have any good data on UK/Europe refinery capacity.
If gasoline is cheap in the US just now, why is it so expensive in the UK.
There have been no significant changes in fuel duty in the last 6 weeks, and if prices are high in the UK and low in the states, I’d assume we’re shipping much less refined product to the US than we normally do. If so that would theoretically increase supplies to the domestic market.
So what gives, why is gasoline £1.02/litre? Thats 36.45p/litre before tax. Close to an all time high, despite oil prices taking a beating compared with late.
Cheers,
Andy
Any comment on this?
“Exxon is expected to make $39.2 billion for all of 2007, just shy of its previous record of $39.5 billion in 2006, which breaks down to the company earning about $75,000 a minute.
If ConocoPhillips is any indication, Exxon should have no trouble meeting – and beating – estimates.
Conoco, the nation’s third largest oil company, trounced profit estimates by nearly 25 percent when it reported Wednesday morning.”
The rich get richer, but produce less oil. Both stocks are taking a beating today though.
One source that I have available with my company is a daily news summary from various categories such as Energy, Oil, Alternative Energy, etc.
Robert,
What’s the inside skinny on the Bakken Formation?
Bismarck Tribune
Minot Daily News
Bakken Formation on Wikipedia
If what’s out there about it is true, it’s bigger than Prudhoe Bay and ANWR. I had never heard of it until a few days ago.
Regards,
Gary
Notice you don’t mention anything about the second big drop in gasoline demand in a row. Gasoline demand, now at 8.96m b/d is lowest level in almost 2 years (since feb 2006). What is your take on this? Just a seasonal lull, or a sign that high prices and or weakening domestic economy are finally filtering through to consumption? Hard for me to see how, in a reduced demand environment, crude oil prices can stay supported at the high $80-$90 level. Also, how do you see increasing ethanol production affecting demand and playing through to prices?
Anonymous; Yes, gasoline demand is falling in the USA year over year. RR needs to bring us his thnking on this topic.
Also, check this out: Sinopec to invest US$5 bln in Indonesian biofuel project
Jan. 24, 2008 , China’s top oil company, will cooperate with an Indonesian enterprise to set up a biofuel plant in Indonesia, with investment of US$5 billion, told by sources. The plant is located in Papua and East Kalimantan of Indonesia and will be used for extracting biofuel from palm oil and jatropha curcas oil. Sinopec will coop…
A $5 billion investment in palm and jatropha. That is big.
Jatropha promises to produce oil w/o conflicting with crops.
Look for China’s demand for fossil crude to start flattening, perhaps within two years, while the developed world’s demand is falling….
On fossil oil prices, the worst is behind us already…..
Hi, Robert!
According to this rigzone article, global oil production tenatively reached a new all time peak in production at 87.0 million barrels per day during the month of December, 2007.
“The report shows that for December world oil supply averaged 87.0 mb/d, up 870 kb/d from November on increases in OPEC-10, North America, the FSU, Brazil, and China.
Certainly this will have a significant impact on global oil inventories over the next year, as demand is only expected to hover around 87.8 million barrels per day, while there are other projects scheduled to come online that easily offset the remaining shortfall.
How soon do you figure TOD will pick up on this tid bit?
Cheers!
Hothgor
Yes, gasoline demand is falling in the USA year over year. RR needs to bring us his thnking on this topic.
I need to graph it and see what it looked like for the entire year. Looking at the EIA data, some weeks were higher than in 2006, and some were lower. Hard to eyeball it and get a feel for the entire year. But as soon as I get some free time, I will do it.
According to this rigzone article, global oil production tenatively reached a new all time peak in production at 87.0 million barrels per day during the month of December, 2007.
That would be a new all-liquids peak, and I have written some about it. I also expect a new crude plus condensate peak in December.
Yes, gasoline demand is falling in the USA year over year.
Not quite. After showing 1% year over year growth in the first half of 2007, Finished Motor Gasoline demand fell to a 0.1% y/y growth rate since July 1, 2007. That’s essentially flat, but not negative.
Finished Motor Gasoline includes ethanol, though. Since ethanol has been growing dramatically of late, straight gasoline demand has actually fallen at a 1% y/y rate the last 6-7 months. This is basically meaningless in terms of world oil demand, but is a big cause of the collapse in crack spreads at US refineries. Even though ethanol is likely to run out of gas soon (ha ha), flat demand may depress crack spreads for some time.