The Phil Flynn Energy Report
Oil prices stood tall even after a massive 15.2 million-barrel crude oil increase in U.S. oil supply. The increase was enhanced by a record amount of oil imports into the Gulf Coast and was probably impacted by the holiday and the booking of supply. Thanksgiving week, oil demand was disappointing on the product side, but an uptick in refinery runs suggest that refiners are starting to ramp up a bit for winter. Gasoline inventories also saw a jump of 4.2 million barrels last week and are about 5% above the 5-year average for this time of year, as Thanksgiving Day car travel stats were the lowest in over a decade. Distillate fuel inventories increased by 5.2 million and are about 11% above the 5-year average for this time of year.
Now, the crude oil market is looking beyond the numbers. The market held key support and is now focusing on vaccine distribution that could lead to a spike in demand, which should drive global supply back below normal levels next year. Brent crude could take out $50 per barrel and WTI might not be too far behind.
Expectations are that a Joe Biden administration will lead to a slew of executive orders on energy and will put more oil workers out of work, bringing in an era of higher prices. The one thing we might end up missing about 2020 is low gasoline prices, but rest assured with John Kerry as Climate Czar there will be an energy tax coming on Americans in one way or another. Under Joe Biden, the era of low energy prices will likely be coming to an end.
As we’ve been saying, we believe the low for the year was put in weeks ago. Short sellers are frustrated with market action especially after getting that monster crude oil build. Part of the support for oil is coming from China. According to S&P Global, China's state-owned refineries planned to increase crude throughputs in November by an average of 1 percentage point month on month up to 79.8% of capacity.
The state-owned oil giants' 39 refineries — 20 Sinopec refineries, 17 PetroChina refineries, CNOOC's Huizhou Petrochemical, and Sinochem's Quanzhou Petrochemical — planned to process 7.07 million barrels per day (bpd) of crude in November, accounting for 79.8% of their combined nameplate capacity of 8.86 million bpd. China's independent refineries planned to keep run rates broadly unchanged from October, except Zhejiang Petroleum & Chemical, which raised throughput as part of trial runs at its new 10 million mt per year CDU. At the same time, the 20 million mt per year Hengli Petrochemical (Dalian) refinery in northeastern China kept run rates steady on the month at around 105% of capacity.
Natural gas is trying for a comeback. We get the report today! Scott Disavino of Reuters writes that U.S. utilities likely pulled a bigger-than-usual 83 billion cubic feet (bcf) of natural gas from storage last week as liquefied natural gas (LNG) exports posted fresh record highs. That compares with a decrease in inventories of 57 bcf during the same week a year ago and a 5-year (2015-2019) average withdrawal of 61 bcf for the period. Utilities withdrew 1 bcf of gas from storage in the prior week ended Nov. 27. If analysts are on target, the decrease during the week ended Dec. 4 would take stockpiles to 3.856 trillion cubic feet (tcf). That would be 7.5% higher than the 5-year (2015-2019) average and 9% above the same week a year ago. The U.S. Energy Information Administration (EIA) will release its weekly storage report at 10:30 a.m. EST on Thursday.
The amount of gas flowing to U.S. LNG export plants rose to an average of 10.4 billion cubic feet per day (bcfd) so far in December, which would top November's 9.8 bcf per-day record. Meanwhile, last week's weather was only slightly warmer than usual with 155 heating degree days (HDDs), compared with a 30-year normal of 160 HDDs for the period, data from Refinitiv showed. HDDs, used to estimate demand for heating homes and businesses, measure the number of degrees below 65 degrees Fahrenheit (18 degrees Celsius) a day's average temperature is. Reuters polled 18 analysts, whose estimates ranged from a withdrawal of 99 bcf to 70 bcf, with a median decrease of 84 bcf. Early estimates for the week ending Dec. 11 ranged from withdrawals of 129 bcf to 61 bcf, with a mean decrease of 111 bcf. That compares with a decrease of 97 bcf for the same week last year and a 5-year average withdrawal of 105 bcf.
Also Grain Report! Big day!
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