Around The Barrel – Crude Oil Draws -4.633Mbbls, But Doesn’t Offset Products Storage Builds

Oil prices continue to fall to test the large option barrier at $70 WTI Prompt futures after the week’s storage report. Prices having declined for the sixth straight week at settle, the longest since 2021 despite the geopolitical risks in the Middle East. EIA reported a crude draw of -4.633Mbbls. Gasoline stocks rose +5.420Mbbls and distillate rose +1.267M Mbbls in inventories. Refinery utilization rose +0.7% to 89.6%. The WTI Futures Hub at Cushing stocks bounce off the lowest level since October 2014 with a build of +1.854Mbbls. Domestic US oil production figures was -100kbpd lower off an all-time high at 13.1mbpd.

An inconclusive, if not dysfunctional OPEC+ meeting saw WTI crude oil futures decline 1.5% this week to $74.07/bbl which helps the disinflation trend. OPEC+ confirmed additional voluntary cuts to the total of 2.2 million barrels per day, beginning January 1 through the end of March 2024. The OPEC decision underscored the long-anticipated fissures amongst the members. We have also seen huge outflows in the USO ETF.

Oil Volatility

The energy complex closed last week with WTI oil futures closed -1.95% for the week Brent crude down -1.60% for the week. Gasoline down -0.67% for the week, and heating oil fell -3.65%% for the week. (Prices w/w at 16:00 ET close). The WTI price is well off its September 28 high of $94.99.

We remain vigilant in a market with constant ongoing Saudi and Russian price manipulation and threats of an expanding Mid East war. To that end recall the self-important delusion of Saudi energy minister Prince Abdulaziz bin Salman saying that people are just “pretending” oil demand is weak, claiming “it’s all a ploy” by speculators.

Goldman Sachs Talking Their Book:

Goldman Sachs analysts said last week it expects OPEC+ will keep a floor under the crude oil price next year.

“We believe OPEC will ensure that Brent oil prices end up in a $80-$100 range in 2024 by ensuring a moderate deficit and leveraging its pricing power,” Goldman analysts including Daan Struyven said.

Meanwhile, Goldman Sachs forecast robust demand, slowing US supply growth, and lower OPEC output for longer would result in a moderate daily deficit in the oil market in 2024.

“We expect that gentle inventory declines will raise time spreads and Brent to a peak of $US95 a barrel by August 2024, with the 2024 average at $US92 a barrel,” it said.

The moves remind investors the importance of the supply and demand matrix, derivative or paper positioning which includes hedging and speculation and the weighting of those positioning. Many forget that oil is a true commodity and as we say the rubber always meets the road. Timing matters, particularly when you play with margins.

With that focus is on soft demand, stockpiles and China factory activity back into contraction last month. There is also Brazil’s rising oil production, with Petrobras announcing a new USD 100 billion capex 5-year plan. Oil had been soft all week amid lower refinery margins and seasonal demand weakness. The earnings reports from Exxon, Chevron and Phillips 66 all confirmed the refinery margin weakness.

The Hamas attacks have nixed the US and Saudi Arabia muted deal to pump more oil and recognize Israel in exchange for US defense guarantees. Prior to Hamas WTI Oil futures had been pulling back with the weight of falling risk assets and higher rates threatening economic growth and therefore demand.

The aggressive move high four weeks ago was also helped by the sharp long-liquidation week which left the futures market exposed to a geopolitical risk such as the Israel-Hamas conflict potential to effect oil production and transportation in the Middle East. Note the Levant is not a significant oil producing region and is unlikely to impact oil supply in the short term, it the ally risk and possible flow on. Traders’ eyes are on Iran with their backing of Hamas and the Biden’ Administration softening stance there prior to the attack.

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 Week Ahead

DOE Weekly Petroleum Status Report Forecast

  • via TradersCommunity.com
  • Report Date 11/22/23
  • Release Date Wednesday Nov 29, 2023, at 10:30 A.M (Delayed for EIA Upgrade)

Highlights

  • Crude EIA -4.633M Exp +1.160M Prior +1.622M API +0.594M
  • Cushing EIA +1.829M Exp +0.750M Prior +1.854M API +4.28M
  • Gasoline EIA +5.420M Exp -0.133M Prior +1.764M API +2.83
  • Distillate EIA +1.267M Exp -1.000M Prior +5.217M API +0.890M
  • Refinery Utilization +0.70% to 89.6% Exp +0.90%
  • Production -100kbpd to 13,100kbpd (13.20 ATH)
  • SPR +0.300M
  • US petroleum inventories (crude, SPR, refined products) fell by 1.383mb w/w to 1,621.239mb last week – EIA

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

EIA reported a crude draw of -4.633Mbbls. Gasoline stocks rose +5.420Mbbls and distillate rose +1.267M Mbbls in inventories. Refinery utilization rose +0.7% to 89.6%. The WTI Futures Hub at Cushing stocks bounce off the lowest level since October 2014 with a build of +1.854Mbbls. Domestic US oil production figures was -100kbpd off an all-time high at 13.1mbpd.

Now what does this all mean? We estimate a delta of ~6.4 million bbls difference going forward. Our preliminary for Dec 8 week shows +7.53 million bbls. If our assumption is correct, EIA would report closer to +1 million bbls next week. P.s. Preliminary estimate for next week @HFI_Research

Energy Price Matrix

Energy Market Performance
W/e 12/1/2023
November 2023

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.

Nov 29 US petroleum inventories in million barrels – EIA via @staunovo

Crack Spreads Matter

Russia plans to reduce diesel exports from its key western ports by a quarter this month amid seasonal refinery maintenance and government efforts to keep more fuel at home to ease growth in domestic prices (Bloomberg). Surging #diesel futures underpinning crude oil prices with today’s gains being led by a 3% rally in the ICE Gasoil (diesel & heating oil) contract. Priced in USD per barrel, gasoil and ULSD trades at $130.5 and $137.6 per barrel respectively @Ole_S_Hansen
American commercial crude stockpiles plunged a week in August by 17 million barrels — the largest weekly drop in data going back more than 40 years. @JavierBlas

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

Weekly DoE US Petroleum Storage Report Breakdown

Weekly Storage via DOE

with RonH Data ‏@Ronh

  Via RonH at Ron H Public Tableau Link

API Crude Oil Inventories

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

US petroleum inventories (crude, SPR, refined products) fell by 1.383mb w/w to 1,621.239mb last week – EIA

US petroleum inventories (crude, refined products, SPR) rose by 26.139mb m/m to 1,634.660mb in September – EIA

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

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
Crude inventories at Cushing at 21mb are at the lowest level since October 2014 – EIA 10/18/23

API Cushing Stocks

API Cushing

Weekly Update via RonH Data ‏@Ronh999

US stocks of distillate fuel (diesel and heating oil)

CHART OF THE DAY: Let’s hope the US economy is truly slowing down — particularly manufacturing –, and that the winter is mild. US stocks of distillate fuel (diesel and heating oil) are ending the fall season at their lowest seasonal level in data since 1982 Javier Blas @JavierBlas Nov 15 2023

It is important to address the situation in diesel.

If you recall our colleague, legendary journalist Robert Gibbons mentioned months ago the reporting on it was incorrect and seemingly agenda based. The fundamental and technical basis did not match the constant fear reporting by analysts and reporters. That no doubt led to top heavy speculative positioning and explains much of the sell off. Throw in a sputtering, at best Chinese economy and declines in European industrial and economic activity has seen a sharp retreat in fuel consumption.

In addition, there is the overwhelming supply we spoke of month ago, this has expanded further. To quote Manish Raj, managing director at Velandera Energy Partners to MarketWatch that “smugglers, dark fleet operators, thieves and black-market dealers are working overtime washing and gushing oil produced or stolen from Russia, Iran, Kurdistan, and Nigeria.”

US Oil Import Export

Imports

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

  • Canada +729 to 3972
  • Mexico +305 to 876
  • Saudi Arabia +259 to 400
  • Colombia +146 to 289
  • Iraq -12 to 166
  • Ecuador +140 to 252
  • Nigeria +52 to 226
  • Brazil +126 to 274
  • Libya +87 to 87
  • 12/6/23
U.S. Net Imports of Crude Oil and Petroleum Products (Thousand Barrels per Day) – EIA
US crude imports from #Venezuela were at 163kbpd in September vs 145kbpd in August – EIA

Exports

US crude exports

Top buyers of US crude in September in kbpd (Total exports: 4.157mbpd) -EIA

  • Netherland 590
  • China 562
  • South Korea 544
  • Canada 337
  • Singapore 270
  • Spain 230
  • Italy 229
  • India 156
  • UK 153
U.S. Exports to China of Crude Oil (Thousand Barrels per Day) – EIA

Top buyers of US refined products in September in kbpd (Total exports: 5.903mbpd) – EIA

  • Mexico 1,208
  • Japan 610
  • China 493
  • Canada 397
  • India 208
  • Netherlands 191

The Russia, India and China mix

Russia said they would cut production by 500kbbls in March just as Russia 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.

EU’s sanctions on Russian refined products were 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 has been addressing energy dependance on Russia since the Ukraine invasion. 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.

US Gasoline Consumers

Input to Refineries

Update: PADD 3 Refinery Utilization

U.S. Refinery Utilization (%) via ⁦@SoberLook 11/15/2003

US consumers bought 344.7 million gallons of gasoline per day last week. That is -4.7 mil YoY.

US consumers spent $1,116.0 million dollars per day for gasoline last week. That is $-118.5 mil YoY.

US avg retail price for gasoline was $3.238 last week. That is -0.296 YoY.


Rig Watch

Baker Hughes Weekly North American Rigs Report

The Baker Hughes U.S. oil and gas rig count, fell by seven to 623 in the week to Sept. 29, the lowest since February 2022. The total rig count fell by 51 in the third quarter, the cuts have slowed compared with a reduction of 81 in the second quarter as oil prices rebounded.

  • US Baker Hughes Rig Count 24-Nov: 622 (prev 618)
  • Rotary Gas Rigs: 117 (prev 114)
  • Rotary Oil Rigs: 500 (prev 500)
  • Baker Hughes reported the number of active U.S. natural gas drilling rigs in the week ended November 24 rose +3 rigs to 117 rigs, just above the 19-month low of 113 rigs posted September 8. Active rigs this year have fallen back after climbing to a 4-year high of 166 rigs in Sep 2022 from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).

US Oil Rigs w/w changes by key shale basins

  • Permian unchanged at 307
  • Eagle Ford unchanged at 47
  • Williston unchanged at 33
  • Cana Woodford +1 to 15
  • DJ Niobrara -1 to 14

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

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US oil rigs and frac spread (Baker Hughes/Primary Vision)
Nov 3. 2023
  • Permian Basin rigs pulled off at the fastest pace in three years amid consolidation and slow return in oil demand.
  • Rigs targeting both crude and natural gas in the West Texas and southeast New Mexico region declined by 7 to 320 this week, according to data released Friday by Baker Hughes Co.
  • It’s the biggest weekly drop in the Permian since June 2020. – Bloomberg

Canada Rigs

  • Canada’s active rig count reached 187 on October 27, an increase of 1 rig compared to last Friday. Alberta’s active rig count decreased from 134 last Friday to 133 this morning, while Saskatchewan’s rig count decreased by 3.3%. BC’s active rig count rose slightly, reaching 20 rigs today.
  • Oil rigs decreased by 4 between October 20 and October 27, settling at 111 active oil rigs.
  • Gas rigs increased by 5, settling at 68.
  • The number of rigs classified as “Other” or “Unknown” held fast at 8 rigs.29dk2902l
  • Today’s rig utilization rate is 44.8%, a modest drop from 45.8% at last week’s end. The total number of rigs increased from 406 to 417, a 2.7% jump. This suggests that, compared to last week, a larger pool of rigs is being deployed less efficiently.
  • BOE Report

International oil rigs ex North America

International oil rigs ex North America +8 m/m to 744 in November – Baker Hughes

UK +3
Turkey, Kuwait +2
Norway -5

Ministry of Energy: Saudi Arabia will extend the voluntary cut of one million barrels per day for another month to include September that can be extended or extended and deepened.

Riyadh, August 03, 2023, SPA — An official source from the Ministry of Energy announced that the Kingdom of Saudi Arabia will extend the voluntary cut of one million barrels per day, which has gone into implementation in July, for another month to include the month of September that can be extended or extended and deepened. In effect, the Kingdom’s production for the month of September 2023 will be approximately 9 million barrels per day. The source also noted that this cut is in addition to the voluntary cut previously announced by the Kingdom in April 2023, which extends until the end of December 2024.
The source confirmed that this additional voluntary cut comes to reinforce the precautionary efforts made by OPEC Plus countries with the aim of supporting the stability and balance of oil markets.
–SPA

KSA Ministry of Energy 15:51 LOCAL TIME 12:51 GMT

US Oil Production

US Oil Field Production -100kbpd at 13.10mbpd (New Benchmark adj)

Crude production from the 4 major US shale plays now exceeds 9mbd out of the total US crude production of 13.2mbd. 70%. @DialPauldial

EIA New Production Calculation

Below is a summary via HFI Research

The formula is simple: US crude oil production + transfers to crude oil + adjustment.

Now there are still major flaws in the weekly oil storage reports that require the modified adjustment. For example, EIA does not take into account real-time US crude exports or imports. So the variance between these two figures could explain large differences in the adjustment. If you took this week for example, the reported adjustment came in at +512k b/d, while our modified adjustment showed +95k b/d. This is because EIA overstated both crude exports and crude imports to the tune of 417k b/d.

So going forward, there will be times when the adjustment comes in massively positive or massively negative, but over time, the adjustment should start to revert back to zero or possibly negative, while transfers to crude oil remain positively around ~+700k b/d.

If you look at our modified adjustment since the start of 2021, our dataset averaged ~750k b/d. We used ~750k b/d as our “plant condensate” figure to derive our weekly US crude estimates.

Now, in reality, this is an average, so week-to-week volatility will usually be elevated. But over time, this figure almost always goes back to the mean. In other words, if EIA over-reports crude draws or crude builds, they almost always revert back over the coming weeks.

US oil production is around ~13.2 million b/d. EIA’s latest change in adjustment math has really helped our modified adjustment calculation. The only issue remaining is the “reported” crude imports and exports vs “actual”. But that’s ok, we can easily solve that problem. @HFI_Research Nov 29, 2023

New post-COVID record, only 90 kbpd below the all-time crude production record set in November 2019.

m/m changes in kbpd

US crude production data – weekly vs monthly figures – weekly data is mostly model based, using as an input two month lagging data from the monthly report, monthly data is based on company reporting (values in mbpd – data from EIA)
  • US crude production m/m changes in kbpd by state/region (September vs August)-EIA
  • Gulf of Mexico +108
  • North Dakota +79
  • New Mexico +20
  • Alaska +19
  • Utah +9
  • Ohio +9
  • Texas -3
  • Colorado -3
  • Oklahoma -4
  • Total US: +224
North Dakota oil production was at 1.134mbpd in May, -0.2% m/m, +6.7% y/y – state

OPEC Crude Oil Production

OPEC+

Voluntary OPEC+ supply cuts for 1Q24 – Nov 30 23 Meeting
Saudi Arabia 1mbpd
Russia (300kbpd crude, 200kbpd fuel oil) -> exports
Kuwait 135kbpd
Kazakhstan 82kbpd
Algeria 51kbpd
Oman 42kbpd

Ministry of Energy: Saudi Arabia will extend the voluntary cut of one million barrels per day into next year that can be extended or extended and deepened

Weather Watch

Gulf of Mexico


WTI Crude Oil Futures Technical Analysis

via KnovaWave @KnovaWave

US Crude Oil (WTI)

The aggressive move high three weeks ago was also helped by the sharp long-liquidation week which left the futures market exposed to a geopolitical risk such as the Israel-Hamas conflict potential to effect oil production and transportation in the Middle East. Note the Levant is not a significant oil producing region and is unlikely to impact oil supply in the short term, it the ally risk and possible flow on. Traders’ eyes are on Iran with their backing of Hamas and the Biden’ Administration softening stance there prior to the attack.

For perspective the Friday before the attacks West Texas Intermediate settled around $83 a barrel, down $8 this week to its lowest since August, erasing gains from the extension of production cuts by Saudi Arabia and Russia. Prices had risen over 30% with OPEC+ campaign to reduce supplies and raise prices. Sliding crack spreads for refined products are impacting. At one point this week, gasoline was trading less than $8 above crude, halving from two weeks prior. Diesel’s premium over crude fell to the lowest since July as Russia lifted an export ban for its oil producers.

Daily:  WTI Crude Oil continues to trade in the long channel from last year’s panic high and bounced last month around the 38% zone around 64 and option confluence back through the minor pennant resistance. From there we had a sharp spillover emotive wave up creating a clear break over the 50 dma, Kijun and Tenkan kiss of life. The move up came after completing the correction in 3 wave from gap fill and fail of the daily bull flag back in Oct/Nov. Through the Hamas/Israel spike higher we spat the outer channel and are working through that overhead speculative supply. For bulls needs to break above those descending levels for higher.

We are in a completive mode 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. The bear case is the high was a complete 5.

Weekly: WTI crude Oil futures simply reversed downside momentum near the key 61.8% with impulse, having plunged more than $60 off the June highs. WTI was never able to take on its sphere of influence which is causing resistance now as it has bounced off the double bottom through Kijun. The support is 50wma for the upside. Recall WTI completed 3 waves and spat the 50wma after the since filled OPEC+ gap up underscoring its weakness prior to the Hamas attack. Near lows underscore the support, no less than 5 times since April 2021. Risk support is the grid. Long term 61.8% target fueled the spit of a spit by after rebalanced Chikou sated. Support Weekly Kijun, tenkan, 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 opened up the objective 2020 yearly open and 2018 high at 75.35-76.87 which gave away and has held on to attempts to get above. This is an area of interest for downside exhaustion and price inflection potentially.


Crude Oil Futures Commitment of Traders

Latest ICE and CFTC Open Interest Data:

CTFC and ICE open interest:

Money managers increased their net-length in Brent crude oil futures and options by 11,630 contracts to 166,735 in the week ending November 28 via ICE

  • Long-only positions rose by 6,767
  • Short-only positions fell by 4,363
  • other reportables net-length fell by 8,467

Money managers reduced their net-length in WTI crude oil futures and options by 6,408 contracts to 98,137 in the week ending November 28 via CFTC

  • Long-only positions rose by 3,621
  • Short-only positions rose by 10,029
  • other reportables net-length fell by 15,073
October 31, 2023

Aggregated open interest in Brent and WTI in million contracts

COT on Commodities

COT on commodities in week to Nov 28:

-Crude oil: Brent bought, WTI sold ahead of OPEC+
-Gold long +26% to 144k, a six-month high
-Silver long jumps 55%, Platinum flips back to long
-Copper long cut by 37% ahead of upside break
-Grains: broad selling sees corn short hit June 2020 high
-Softs: coffee long unch. ahead of surge
-Livestock: broad selling led by hogs

via Ole S Hansen @Ole_S_Hansen

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

The sharp move in WTI to $63 in May and then rebound came after ten-day volatility in oil rose the highest level since October as crude sank for a third week. It gives a good indicator of complacency and optionality out there in slow price ranges. API reported big product draws which is supportive for the cracks. The contango structure and inflation having cooled from its recent peak, but remaining stubbornly elevated adds a volatile dynamic around settlements. The US regional banking disaster filtered through to commodities such as oil, copper and natural gas.

Ten-day volatility in oil jumped to the highest level since October as crude sank for a third week.

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 Q2 2023

Major oil companies reported Q3 earnings:

Lower earnings have been across the big oil board.

The three major oil services companies all reported Q3 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