Updated
Gasoline inventories did in fact edge upward, as gasoline imports were very strong. Had that not been the case, gasoline inventories would have definitely come down, as utilization continues to trend down. In fact, just glancing over the data, more gasoline may have been imported this January than in any other January before. As long as that continues, gasoline prices won’t gain much traction. But European refiners have to take turnarounds as well, so gasoline imports typically fall off in February and March.
Here is the summary:
Summary of Weekly Petroleum Data for the Week Ending January 25, 2008
U.S. crude oil refinery inputs averaged 14.6 million barrels per day during the week ending January 25,down 302,000 barrels per day from the previous week’s average. Refineries operated at 85.0 percent of their operable capacity last week. Gasoline production edged slightly lower compared to the previous week, averaging about 8.9 million barrels per day. Distillate fuel production fell last week, averaging nearly 3.9 million barrels per day.
U.S. crude oil imports averaged about 10.1 million barrels per day last week, down 100,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 10.1 million barrels per day, unchanged from the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged nearly 1.2 million barrels per day. Distillate fuel imports averaged 277,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose by 3.6 million barrels compared to the previous week. At 293.0 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 3.6 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and gasoline blending components inventories increased last week. Distillate fuel inventories declined by 1.5 million barrels, and are in the lower half of the average range for this time of year. Propane/propylene inventories decreased by 3.0 million barrels last week. Total commercial petroleum inventories decreased by 1.0 million barrels last week, and are in the middle of the average range for this time of year.
Pre-Release Commentary
OPEC is meeting later this week, but the comments coming from various members indicate that they are unlikely to boost production. I think this continues the theme that we saw most of last year, where truly low inventories were mostly prevented by higher prices, and then OPEC used the inventory situation to suggest that markets are adequately supplied – which completely ignores the price signal. But certain OPEC members have now grown dependent upon the revenues provided by $100 oil. As long as they maintain solidarity, it is unlikely they will allow the price to drop too much – recession or now.
Here is what analysts are forecasting for this week:
A Reuters poll of analysts ahead of weekly U.S. government inventory data forecast a 2.1-million-barrel rise in crude stocks, a 1.9-million-barrel draw in distillate inventories and a 2-million-barrel build in gasoline stockpiles.
If spring turnarounds are indeed starting early, then the only way gasoline stockpiles will build is if gasoline imports remain strong (which they were last week). If that is the case, then $4 gasoline will remain elusive, as imports will keep pressure off of inventories.
That same story also had a note about speculative positions:
U.S. regulator data on Friday showed NYMEX crude oil speculators slashed their bets on rising prices in the week to Jan. 22 to their lowest since mid-December, cutting net long positions by nearly 50,000 lots to 37,000. “It shows the large speculative funds reducing aggressively their net length exposure on futures through a combination of long liquidation and fresh short positions,” said Olivier Jakob at Petromatrix.
There is concern about a recession dropping prices, but I think the counter to that is that OPEC would probably be willing to cut if prices dropped too much. I will update following the release of the report.
As long as they maintain solidarity, it is unlikely they will allow the price to drop too much – recession or now (sic).
These guys will get hit by a recession like the rest of us. They can cut production and keep prices high or leave production and see prices drop. Either way they loose income.
Their choice would, of course, have implications for the enthusiasm with which alternatives are pursued.
I expect Chavez and the mullahs to be in favor of cutting production, the Saudis against. So there you have it: alternative energy’s best allies are Chaves and the mullahs. What a strange world indeed!
This is off topic, but I would like to see you comment on Robert Zubrin’s “Energy Victory” proposal (http://energyvictory.net) which is getting a lot of attention in the blogs. He calls for mandating flex fuel vehicles which, he claims, will lead automatically to mass production of ethanol and/or methanol and free us from dependence on imported oil. His book has one enthusiastic review after another on Amazon, readers raving over how this simple proposal will fix our energy woes.
You briefly discussed Zubrin’s ideas here, http://i-r-squared.blogspot.com/2006/06/e85-m85-or-gasoline.html, and were somewhat favorable. But now that this book is out I am concerned that it is just going to lead to more emphasis on what is ultimately a dead end approach.
Coal to methanol is only going to make global warming worse. And biofuels as we have seen have both severe capacity limitations and drive up food prices – see Stuart Staniford’s recent analysis of the devastating effects of depending on food crops for energy (http://www.theoildrum.com/node/2431).
It seems to me that Zubrin is delusional to think that his plan is going to make a substantial difference in our dependence on oil imports. I would much rather see us move towards electrification of transportation as a sound, long-term solution that has the potential to be environmentally friendly as well. Zubrin’s Energy Victory would be a massive turn in the wrong direction.
Supplies seem adequate, and demand is faltering, in the face of higher prices.
The right thing to do would be to tax consumption, to keep the price high for consumers, while driving down wholesale and crude prices. We can transfer mnoney to the US Treasury or to Oil Thug States. I like the former.
This is off topic, but I would like to see you comment on Robert Zubrin’s “Energy Victory” proposal
Quite a few people have asked about this. I will need to take a critical look at it.