Around The Barrel – US Awash with Oil, Crude Builds Another 16.283mbbls, Adding 49.948mbbls in 2023.

The massive builds from low refinery usage due to maintenance continue to crush expectations. On the supply side we have the relentless build in US crude oil inventories continued with +16.283Mbbls last week EIA reported. For the past 6 weeks US crude stockpiles have risen by 49.948Mbbls. Oil prices continue to trade back and forth between geopolitical risks and massive builds from low refinery usage due to maintenance.

Last week Russia said they would cut production by 500kbbls in March just as Russia on Friday launched its heaviest bombardment on southern Ukraine since the start of the war, as officials warned Moscow’s major offensive had ‘definitely’ started. There is a clear use of oil as a weapon by Putin. India and China being Russia’s main customers are not filling the demand void. Not hard to join the dots.

Oil Outlook Messy

Last week futures in the energy complex all rose. WTI futures rose +7.89% on the week, Brent rose +8.19%, gasoline rose +7.54% and heating oil rose +3.22%.

Markets will focus more acutely over the coming weeks on the effects of the EU’s sanctions on Russian refined products to be implemented Feb. 5. The ban follows a similar price cap on crude shipments introduced last year. European countries have pushed to lower the crude price cap ($60) on Moscow even further, but the Biden administration said it was inclined to oppose the move. 

Futures have been ignoring large US builds and have chosen hope with China opening up rather than negative morose from China’s economic implosion and the Central Bank maelstrom. Europe appears to be readdressing energy dependance on Russia since the Ukraine invasion has been a slow and indecisive one by Germany. President Vladimir Putin said Russia would immediately stop oil supply to countries that support the G7 members price cap on exports of Russian oil.

Since the cap, if not before Russian exports have been redirected to India and China in particular. Russian crude exports into India rose by 260kbd m/m in December to a record 1.2mbd. January exports are on-track to nearly 1.3mbd of Russian crude. Russian Exports to China were 70kbd in December, down nearly 27%m/m. We have seen Malaysia increase exports well beyond its own output to China. In turn China has exported products such as distillates back to Europe. Where did that oil come from? Wink, Wink.

Around The Barrel Contents

Click on the links below to navigate to the relevant section.

  1. DOE & API Petroleum Storage Forecast Matrix
  2. Crude Oil Quick Summary
  3. Weekly DoE US Petroleum Storage Report Breakdown
  4. API Crude Inventories
  5. Cushing Oil Stocks
  6. Crude Imports
  7. Crude Exports
  8. Gasoline
  9. Rig Watch
  10. Crude Oil Production
  11. Weather
  12. WTI Crude Oil Futures Technical Analysis
  13. DCOT Report
  14. Option Volatility and Gamma
  15. Key EIA and CME Dates

The risks of global recession threaten the demand picture and with higher rates push the likelihood of a meaningful recession higher. In 2023 the market has in the background the obtuse geopolitical framework framed by Russia’s Ukraine invasion, Germany’s inept energy policy, and Iran and China pursuing aggressive directions.

The soaring US dollar has had a significant impact on commodity futures which has since reversed with the USD back at 7-month lows. Through it all demand and supply issues are the underlying guide.

DOE Weekly Petroleum Status Report Forecast

  • via TradersCommunity.com
  • Report Date 2/8/23
  • Release Time: Wednesday, February 15, 2023, at 10:30 A.M. (ET)

Highlights

  • Crude EIA +16.283M Exp +2.17M Prior +2.423 API +10.507M
  • Cushing EIA +0.659M Exp +0.773M Prior +1.043M API +1.954M
  • Gasoline EIA +2.316M Exp +2.014M Prior +5.008M API +0.846M
  • Distillate EIA -1.285M Exp +0.524M Prior +2.932M API +1.728M
  • Refinery Utilization -1.40% to 86.5% Exp -1.3%
  • Production +UNCH kbbls at 12,300kbpd (13.10 ATH)
  • SPR release No Change (Lowest Since 1983)
  • NB: Crude oil supply adjustment rose by 2.669mbpd to 1,967mbpd last week – EIA
  • US petroleum inventories (crude, SPR, refined products) rose by 19.209mb w/w to 1,629.756mb last week

Note in bbls *exp = Reuters poll estimates adjusted for API shift, except Cushing

US petroleum (crude, SPR, refined products) inventories rose by 3.354mb w/w to 1,610.547mb last week

Stocks have been building rather stoically in 2023, specifically at the Cushing WTI futures Hub. The EIA reported another +1.043M build there, bringing the build to 13.782Mbbls in those same 5 weeks. Gasoline also had another sizeable build of +5.008M, bringing the build to 16.944Mbbls over the last same 5 weeks.

Early Look at Next Week

Due to low refinery throughput, the preliminary estimate for next week shows another crude storage build. We will need to see product storage to start drawing in February. HFI Research @HFI_Research

Final 2022 Inventory

  • Commercial crude oil inventories were up ~2.8m bbls
  • SPR inventories were down ~ 221.3m bbls
  • Gasoline inventories were down ~10.1m bbls
  • Distillates were down ~6.5m bbls
  • Jet Fuel inventories were down ~0.9m bbls
  • Propane was up ~14.5m bbls

Energy Price Matrix

Energy Market Close 2 10 2023

Update: PADD 3 Refinery Utilization


US Crude Oil Quick Look

Oil prices continue to be subject to geopolitical bifurcation dynamics with sudden changes that accompanies the onset of chaos. The unexpected knock-ons continue with imperfect bifurcation with political influence and personal vagaries from world leaders such as Putin, Scholz and Biden in addition to routine crude dynamics.

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via Ole S Hansen @Ole_S_Hansen

Weekly DoE US Petroleum Storage Report Breakdown

Weekly Storage via DOE

with RonH Data ‏@Ronh and The Fundamental Angle ‏@BrynneKKelly

  Via RonH at Ron H Public Tableau Link

The Fundamental Angle with Brynne Kelly ‏@BrynneKKelly

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API Crude Oil Inventories

US petroleum (Crude, SPR, oil products) inventories in million barrels (EIA)

US total crude oil inventories (both commercial and the Strategic Petroleum Reserve) have fallen to a 36-year low, dropping below the previous bottom set in 2001 via Bloomberg

  • US crude stocks In SPR fell to lowest since Dec 1983.
  • We saw -0.000Mbbls taken from the SPR into the crude oil market.
  • US petroleum (crude, SPR, refined products) inventories rose by 19.209mb w/w to 1,629.756mb last week – EIA
  • US total crude oil inventories (both commercial and the Strategic Petroleum Reserve) have fallen to a 36-year low, dropping below the previous bottom set in 2001.

US SPR crude inventories unchanged w/w at 371.6mb Jan 13, 2023. Sour unchanged w/w at 203.0mb Sweet unchanged w/w at 168.6mb

Cushing Oil Stocks

Cushing, OK is the hub for the most heavily traded US oil Futures contract – West Intermediate Crude – WTI so for that reason we pay special attention to the storage there.

Cushing Storage Tanks
Cushing Storage Tanks

API Cushing Stocks

API Cushing

Weekly Update via RonH Data ‏@Ronh999

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Cushing OK Crude Oil Storage Stocks

Closer Look at Cushing with DigStic Data @DigStic

US Oil Import Export

Imports

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US crude imports by origin in kbpd (incl w/w change)

  • Canada -300 to 3556
  • Mexico -223 to 690
  • Saudi Arabia -122 to 262
  • Colombia +73 to 143
  • Iraq +92 to 322
  • Ecuador -51 to 156
  • Nigeria -173 to 75
  • Brazil +129 to 195
  • Libya -89 to 0
The US was a net-petroleum exporter in October – export of crude and refined products exceeded imports by record 1.629mbpd – EIA

Exports

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US petroleum exports new record high 11.776mbpd in December (crude 4.948mbpd, products 6.828mbpd) – EIA

US exports of crude and refined products in mbpd (EIA) – Record High ~11.776 million b/d.
US crude exports rose to record 4.146mbpd in October – EIA

Top buyers of US crude in October in kbpd (total exports 4.146mbpd)

  • India 509
  • South Korea 430
  • UK 401
  • Netherland 413
  • Canada 383
  • Singapore 346
  • China 332
  • Italy 187
  • Germany 164
  • Taiwan 135
  • Spain 117

US Gasoline Consumers

Input to Refineries

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US consumers bought 347.5 million gallons of gasoline per day last week. That is -12.4 mil YoY.

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US consumers spent $1,178.1 million dollars per day for gasoline last week. That is $-77.1 mil YoY.

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US avg retail price for gasoline was $3.390 last week. That is -0.097 YoY.

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Rig Watch

Baker Hughes Weekly North American Rigs Report

  • US Baker Hughes Rig Count 10-Feb: 761 (prev 759)
  • Rotary Gas Rigs: 150 (prev 158)
  • Rotary Oil Rigs: 609 (est 601; prev 599)

US Oil Rigs w/w changes by key shale basins

  • Permian +5 to 350
  • Eagle Ford unchanged at 68
  • Williston unchanged at 42
  • Cana Woodford +2 to 27
  • DJ Niobrara unchanged at 16
via @staunovo

US oil rigs and frac spread (Baker Hughes/Primary Vision)

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US oil rigs and frac spread (Baker Hughes/Primary Vision)

Canada Rigs

  • Canada Rotary Drilling Rigs 16 Dec 2022
  • Canada averaged 199 active drilling rigs this week according to data from the Canadian Association of Energy Contractors.
  • Of those rigs, 33% are drilling for natural gas, 55% are drilling for oil, 5% for other (helium, hydrogen, geothermal, lithium, or potash), and 7% are moving. Drilling activity by province is 77% in Alberta, 12% in Saskatchewan, 9% in BC, and 2% in Manitoba.
  • Precision Drilling holds the majority of the Canadian market share with 34%, Ensign Drilling with 22%, Savanna Drilling with 9%, Stampede Drilling with 7%, Horizon Drilling with 6%, and Bonanza Drilling with 5%.29dk2902l
  • Canadian data should decline into year-end due to the holiday season for field staff (maybe down to 50 rigs or less).

International oil rigs ex North America

International oil rigs ex North America -12:m/m to 689 in December

  • Algeria +4
  • Turkey +3
  • Abu Dhabi +3
  • Nigeria +2
  • Saudi Arabia -2
  • Argentina -2
  • Ecuador -2
  • Mexico -3
  • India -3
  • Kuwait -4
  • Indonesia -4
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US Oil Production

US crude production changed benchmark January 19, 2023: This week’s domestic crude oil production estimate incorporates a re-benchmarking that raised estimated volumes by 52,000 barrels per day, which is about 0.4% of this week’s estimated production total. EIA

US Oil Field Production Unchanged kbpd 12.30 mbpd (New Benchmark adj)

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“North Dakota’s Bakken shale field — once the largest and busiest American shale patch — is showing signs of age, threatening to hold back US oil production as the world thirsts for more crude. Mature wells that are producing more gas than expected are hurting crude output from the Bakken, the Energy Information Administration said… The deteriorating performance was a main reason the agency cut its estimate for 2024 US oil output to 12.65 million barrels a day from an earlier projection of 12.8 million… Even at the lowered estimate for next year, US output would still set a record, surpassing the 12.3 million barrels a day produced in 2019.”

February 7 – Bloomberg (Sheela Tobben)
US crude production was at 12.381mbpd in October vs 12.312mbpd in September (revised from 12.268mbpd) – EIA

OPEC Crude Oil Production

OPEC crude oil production fell by 1m b/d to 28.8m b/d last month according to a survey from Bloomberg. Led by the four Gulf producers that needed to cut according to lower baselines. Overall, the 10 producers with quotas pumped around 1m b/d below the collective target via @Ole_S_Hansen – Bloomberg Survey

Weather Watch

Gulf of Mexico


WTI Crude Oil Futures Technical Analysis

via KnovaWave @KnovaWave

US Crude Oil (WTI)

Daily: WTI Crude Oil still chopping after completing the correction in 3 waves, C at the breakup level broke out of its daily bull flag through tenkan, kijun and 50dma right to the bottom of the cloud such was the impulse. From there it has been held back & needs to break above those descending levels for higher. We are in a completive mode for bulls with this impulse, it’s a question of degree on the topside, use the Murrey math 240/60 grid. From there down in 3 waves, completing a C or IV? Support is previous lows and the bull flag. The bear case is the high was a complete 5.

Weekly: WTI crude Oil futures spat the key 61.8% last month with impulse, having plunged more than 30% off the June highs. It has however been stuck in its sphere of influence since other than a peek this week. WTI completed 3 waves and powered through the tenkan and 50wma, however they both failed to hold the retest. Risk support is the grid. Long term 61.8% target fueled the spit of a spit by ABC bull flag after rebalanced Chikou sated. Resistance Weekly Kijun, cloud and Murrey Math levels and previous breaks (off monthly). Bear case is Wave 5 complete.

The key is crowd behavior to help tell the story which in energy is often around geopolitics. A great example of why we watch ABC corrections and from here we get the energy from the break being balanced. This move that was powered by 50 dma Tenkan spit of a spit – hence the fractal energies reverberations.

These are special times, recall “After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all-time lows to negative pricing we have seen mirror replications.” Above we have Murrey Math time and price

What we broke…….

Crude Oil in the past quarter built a huge bull flag. We watch if the recent break was false, or we fail. Very clear pattern.

The focus remains 85.61-88.01 a region defined by the 2013 low, the 100% extension of the March decline and the 61.8.% retracement of the November advance. A break below opens up the objective 2020 yearly open and 2018 high at 75.35-76.87. This would become an area of interest for downside exhaustion and price inflection potentially. Initial weekly the 38.2% Fibonacci retracement of the June decline at 100.21. Broader bearish invalidation now lowered to the June high-week close / 61.8% retracement at 109.16-110


Crude Oil Futures Commitment of Traders

Latest ICE and CFTC Open Interest Data:

International Exchange (ICE) will not publish a Commitment of Traders Report this Friday

CTFC and ICE open interest:

Money managers increased their net-length in Brent crude oil futures and options by 39,690 contracts to 252,142 in the week ending January 24 via ICE

  • Long-only positions rose by 22,657
  • Short-only positions fell by 17,033
  • other reportables net-length fell by 4,598

Money managers increased their net-length in WTI crude oil futures and options by 6,422 contracts to 188,474 in the week ending January 24 via CFTC

  • Long-only positions rose by 2,177
  • Short-only positions fell by 4,245
  • other reportables net-length rose by 7,841
Jan 24 2023

Chart: Crude net-positioning of non-commercial accounts (=managed money and other reportables) in barrels and in US dollars (Brent and WTI futures and options combined) latest value is Jan 24, 2023

COT on Commodities

Specs sold Crude oil for a second week in response to a near 10% slump in the first days of trading. The comb. net long was cut by 13.6k lots to 313k lots, driven by WTI long liquidation (-10.8k) and fresh short selling in Brent (+10k). Natgas short hit March 2020 high #OOTT

Money managers in commodities covering the wk to Jan 10 saw speculators make major changes as the US dollar and yields dropped and recession risks rose. Hedge funds opened their 2023 accounts by aggressively cutting exposure across the agriculture sector (corn, sugar, coffee, hogs) while buying was concentrated in a few metals led by copper and gold. Total length dropped the most in six months

via Ole S Hansen @Ole_S_Hansen

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via Ole S Hansen @Ole_S_Hansen

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Understanding DCOT Reports

Read Understanding Commitments of Traders Reports – COT, TFF and DCOT  to help understand the disaggregated reports (DCOT) and how they break down the reportable open interest positions into four classifications:

1. Producer/Merchant/Processor/User 2. Swap Dealers 3. Managed Money 4. Other Reportables


Crude Oil Option Volatility Watch

via commodityvol.com

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NYMEX LO = Crude Oil Options First 3 Months (Live Link)

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NYMEX LO & ICE North Sea Brent BRN Crude Oil Options (Live Link)

NYMEX LO NYMEX OH NYMEX OB Options (Live Link)

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NYMEX LO NYMEX OB Options (Live Link)

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Energy Earnings Highlights for Q3 2022

Energy earning season saw increased production and earnings with improved North American and international markets for drilling, completion, and production. In Q3 we saw big oil reporting bumper third quarter profits as the US heads into Midterm elections.  We now have had US Majors Oil giant Exxon Mobil posted a record profit, Chevron also posted a near record profit and Refiner Phillips 66 booked $5.4 billion in gains compared with $402 million during the same period last year. European majors, Shell, Europe’s largest oil company reported profits of $9.45 billion and British oil major BP PLC reported $8.2bn in earnings.


Key EIA and CME Dates for WTI Crude Oil

Key EIA and CME Dates For WTI Crude Oil

From The TradersCommunity US Research Desk