OPEC members serve as the swing producers in the world market because only OPEC producers possess surplus or spare oil production capacity, most of which is in Saudi Arabia. EIA projects that OPEC surplus production capacity will average 2.3 million bbl/d in 2012 and rise to an average 2.6 million bbl/d in 2013.
EIA estimates that OECD commercial oil inventories ended 2011 at 2.59 billion barrels, equivalent to 56 days of forward-cover. Projected OECD oil inventories increase to 2.62 billion barrels and 57 days of forward-cover by the end of 2012, which is among the highest end-of-year levels in the last decade, because of the decline in OECD consumption.
Although there are now two tropical storms working at the moment the closest one... Ernesto does not look like it will be heading into the oil and Nat Gas rich portion of the US Gulf of Mexico while the other.... Florence looks like it may be on a path that takes it into the North Atlantic. Ernesto is now projected to move into southern Mexico and weaken to a depression over the upcoming weekend. Florence has already weakened and has been downgraded to a Tropical Depression and is projected to remain just a depression for the next five days as it moves more toward the north Atlantic. As it looks at the moment neither of these storms will wind up in the oil and Nat Gas rich area of the US Gulf of Mexico at this point in time. As I said last week the tropics now must be on everyone's radar and monitored on a daily basis.
The API report showed another surprisingly large draw in crude oil stocks but with builds in both gasoline and distillate fuel stocks. The API reported a draw (of about 5.4 million barrels) in crude oil stocks versus an expectation for a smaller draw as crude oil imports increased and refinery run rates decreased modestly by 0.5%. The API reported a strong build in distillate stocks. They also reported a small build in gasoline stocks versus an expectation for a modest build in gasoline inventories.
The report is mixed. The market has not reacted modestly in after hours trading with prices modestly higher ahead of the EIA oil inventory report at 10:30 AM today. The market is always cautious on trading on the API report and prefers to wait for the more widely watched EIA report due out this morning at 10:30 AM. The API reported a draw of about 5.4 million barrels of crude oil with a draw of 0.8 million barrels in Cushing, Ok and a 2.2 million barrel draw in PADD 2 which is bearish for the Brent/WTI spread. On the week gasoline stocks increased by about 0.4 million barrels while distillate fuel stocks increased by about 2.4 million barrels.