Crude: Production propped up

October 5, 2017 09:00 AM
Daily Energy Market Analysis

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Oil prices struggled as U.S. oil production was propped up or was it production propaganda? Regardless, oil prices stayed weak even as productions stayed strong. The Energy Information Administration (EIA) that has come under criticism for overestimating U.S. shale production once again raised this week’s U.S. production number. The EIA estimates that U.S. crude oil production rose by 141,000 bpd (barrels per day) or 1.5% to 9.23 million barrels a day the highest reading since 2015.

That took away some of the thunder from a very bullish 6.023-million-barrel crude oil draw and a smaller 1.52-million-barrel increase in Cushing Oklahoma supply, less than the American Petroleum Institute reported. Gulf Coast supply fell by 4.42 million barrels.

Yet, oil products were supportive as the EIA reported a 2.066 million barrel drop in distillate supply and a 1.644 million barrel in gasoline supply. With a slight 0.5 drop in refining runs and a slight drop in demand, oil stagnated on hopes that somehow the shoulder season will allow distillate and crude supplies to catch up with demand. That may be a  bad bet if winter comes early. I know Montana, you are already there.         

The Financial Times is reporting that U.S. petroleum market is undergoing its own version of a property downturn with strong demand, emptying fuel storage terminals and depressing rental rates for tanks. The trend indicates a three-year oil glut may be dissipating — good news for energy producers but unwelcome for terminal landlords and traders leasing space they no longer need. U.S. inventories of distillate fuels, such as diesel and jet fuel, have dropped by 25.3m barrels in the past year to 135.4m, the Energy Information Administration reported on Wednesday. Petrol stocks built slightly last week but were down by 8.5m barrels from a year before to 218.9m. Stocks of both products were falling before hurricane Harvey curtailed U.S. oil refinery output in late August.” A must read in the FT!

About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.