Oil prices move lower after surprise crude oil build

December 16, 2015 12:30 PM

My projections for this week’s inventory report are summarized in the following table. I am expecting a modest draw in crude oil inventories along with a build in gasoline and heating oil stocks as refinery runs are projected to increase as the industry returns from the fall refinery maintenance season. I am also expecting a build in total combined crude and refined product inventories to after two weeks of modest declines.

I am expecting crude oil stocks to decrease by about 2 million barrels as the industry continues to optimize their inventory situation for yearend tax purposes. If the actual numbers are in sync with my projection the year over year comparison for crude oil will now show a surplus of 104 million barrels while the overhang versus the five year average for the same week will come in around 123.1 million barrels.

I am expecting crude oil inventories in Cushing, Ok to show a small build this week as the net inflow (inflow-outflow) into Cushing increased last week. With storage capacity still available in Cushing storage trades are taking place as the economics of storing oil in both the US and internationally are interesting.

The flow of Canadian crude into Cushing, OK, increased 24,992 bpd to 222,481 bpd last week, while volumes into Patoka, IL, on the Keystone pipeline were 328,785 bpd or 18,883 bpd below the previous week’s level. The volumes into Patoka were 6.3 % below last year’s level for the same week while Canadian into Cushing was 11 % above than last year.

Canadian crude imports into the United States increased marginally by 151,000 bpd to 3.061mn bpd for the week ending Dec 4, and were lower than the record-high level set in mid-August by about 330,000 bpd, according to the U.S. Energy Information Agency.

According to Genscape (for more information on Genscape data products visit their website) modest increase last week in the pipeline net flow (inflow minus outflow) into Cushing, which could lead to a build in stocks there based on the reported pipeline flow data in this report. The net flow was 2.1mn bbls for the week ending Dec. 11 compared to 1.7mn bbls during the previous week.

With refinery runs expected to increase by 1 % I am expecting a build in gasoline stocks. Gasoline stocks are expected to increase by 2.5 million barrels which would result in the gasoline year over year deficit coming in around 1.8 million barrels while the surplus versus the five year average for the same week will come in around 1.1 million barrels.

Distillate inventories are projected to increase by 3 million barrels as exports of distillate fuel out of the US Gulf were steady but with only light heating demand last week. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 30.9 million barrels above last year while the surplus versus the five year average will come in around 20.9 million barrels.

The following table compares my projections for this week's report with the change in inventories for the same period last year. As you can see from the table last year's inventories are not in directional sync with the projections. If the actual data is in line with the projections there will be modest changes in the year over year inventory comparisons for everything in the complex.

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