DOE Week of April 21st: Oddly weak oil prices

  • Crude inventories declined this week

    • Excess crude inventories, as measured by seasonally-adjusted days of turnover, have fallen by 26 mb since early March, now only 16 mb

  • Product inventories are normal

  • Crude and key product inventories, taken together, have fallen by 30 mb since early March as measured by seasonally-adjusted days of turnover, and now stand at only 3 mb, which is effectively nothing in practical terms.

  • SPR draws continue at a pace of 150 kbpd this past week

  • Total, diesel, gasoline, and jet fuel supplied (consumption) all look good by recent comparisons, particularly jet fuel and diesel (distillate)

    • There is no recessionary signal in the US data today

  • US crude and condensate production fell by 0.1 mbpd to 12.2 mbpd, materially unchanged in the last ten months

  • Oil prices have fallen back despite OPEC production cuts

    • Oil prices have a distinct recessionary feel.  Flat US oil production, OPEC production cuts, solid US oil demand and ostensibly recovering Chinese demand should be notably bullish for oil prices

    • Clearly, this is not the case and suggests weakness either in the financial demand for oil futures or weak physical demand for crude oil

    • Notwithstanding, our incentive to store analysis continues to show normal supply/demand balances for crude oil into the second half of the year, which should be constructive for oil prices

    • Perhaps tepid pricing is merely a passing blip, but it could also represent a financial crisis in the works or a Chinese economy not as strong as commonly thought