This week’s data is distorted by the July 4th holiday and so not too much should be read into it
Nevertheless, excess crude inventories, as measured by seasonally-adjusted days of turnover, have been rising for the last five weeks, up 23 mb during that stretch
Product inventories were up, no doubt because tank trucks were not moving on the 3rd and 4th to deliver fuel to retailers
Product supplied (consumption) was off this week, again no doubt due to the holiday (ie, product supplied measures wholesale deliveries to retail gas stations, not fuel sales to consumers)
Oil prices have firmed
WTI stands around $75 with Brent at $80
Our Incentive to Store analysis sees slightly tighter balances going forward, but nothing unusual
The EIA has both reduced expectations for prospective world oil supply and raised demand expectations by about -0.5 and +0.1 mbpd respectively. With this, excess crude balances look to head downward from around 600 mb currently to nearer 400 mb a year from now.
This development should be considered constructive for oil prices, but still represents high levels of excess crude, perhaps consistent with $90 Brent, but on paper, not $110 Brent
Of greater interest is the EIA’s forecast for US crude and condensate production, with the graph below showing C+C production from the Lower 48 continental states (which excludes the Gulf of Mexico offshore and Alaska). Most L48 production is shale oil.
L48 supply growth in H1 2023 comfortably exceeded earlier EIA expectations, but in fact supply peaked in April and has been declining every month since, down 200 kbpd through June.
The EIA sees this trend bottoming and turning back up from July.
This is a bit hard to understand, given that rig counts have been declining for seven months and frac spreads are unchanged in more than a year.
In any case, the EIA now sees April 2023 as the expected peak for US C+C production through year-end 2024
